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Tuesday, April 28, 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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  • BoA, Citi likely need more capital. Regulators reportedly told Bank of America (BAC) and Citigroup (C) that the banks may need to raise additional capital based on early stress test results, with a capital shortfall in the billions of dollars at Bank of America. Sources say both banks, unsurprisingly, object to the preliminary findings and plan to present regulators with detailed rebuttals. Analysts also expect Regions Financial Corp. (RF), Fifth Third Bancorp (FITB) and Wells Fargo (WFC) to be among the banks most likely to need capital. Premarket: BAC -12.2%, C -8.5% (7:00 ET).
  • Unstressful stress tests. Elizabeth Warren, head of the Congressional Oversight Panel for TARP, is worried the adverse scenario being used to test banks' health is 'disturbingly close' to current economic conditions, and that there may need to be a second set of stress tests if the economy worsens. She also expressed her disappointment that the government's description of its methodology lacked critical details. Warren wants to see enough details provided by the Federal Reserve to allow outsiders to run their own versions of stress tests. "The stress tests will make a terrific contribution if they are tough and transparent," she said. "If they are not, they will be useless."
  • GM's survival plan looks shaky. General Motors (GM) presented its final plan to restructure outside of bankruptcy by cutting debt, eliminating over 21,000 more U.S. jobs and nationalizing itself by giving majority control to the government. The company said it will file for bankruptcy if its proposed debt swap fails to reduce $27B in bond debt by around 90%. Analysts doubt the debt exchange will succeed, and bondholders blasted the terms of the deal, setting GM up for a likely bankruptcy. In response to the nationalization proposal, which would put 89% of the company in the ownership of the government and the UAW union and present the government with several potential conflicts, a White House spokesman clarified "it is not our desire to either own or run one of the auto companies." Shares -2.5% premarket, after a 20.7% gain yesterday (7:00 ET).

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  • UAW to get 55% Chrysler stake. The tentative agreement reached between Chrysler and the United Auto Workers union would eventually give the UAW 55% ownership in a restructured Chrysler. Chrysler will also issue a $4.59B note to the health-care trust fund that the union will manage for retired workers. Fiat will 'eventually' end up with a 35% stake, while the government and Chrysler's secured lenders will get 10% ownership. Separately, Daimler agreed to give up its remaining 19.9% stake in Chrysler and pay up to $600M into the automaker's pension fund.
  • BP profit fall prompts spending cuts. BP's (BP) Q1 net income fell to $2.56B ($0.14/share) from $7.09B ($0.37/share) the year before, prompting the oil company to cut its 2009 spending target for a second time to less than $20B. Despite the profit slump, the company still beat analyst estimates with adjusted earnings of $2.58B vs. $2.2B consensus. BP raised its quarterly dividend 4% to $0.14 per common share. Shares +1.9% premarket (7:00 ET).
  • SEC freezes financier's assets. The SEC froze the assets of financier Danny Pang and two of his firms, accusing Pang of defrauding investors of hundreds of millions of dollars. Regulators say Pang faked his resume, forged documents, pledged unrealistic returns and paid investors with cash raised from new ones.
  • Deutsche posts profit on I-bank income. Deutsche Bank (DB) returned to profitability in Q1 with net income of €1.19B as trading income rose at its investment bank. Investors remain concerned about the possibility of future writedowns and as earnings from so-called stable businesses missed analysts' expectations. CEO Josef Ackermann agreed to extend his contract by three years. Shares -4.0% premarket (7:00 ET).
  • Citi to sell Japan units. Citigroup (C) will reportedly sell most of its Nikko Cordial Securities Inc. and Nikko Citigroup Ltd. businesses in Japan to Sumitomo Mitsui Financial Group (SMFJY.PK) for over ¥500B ($5.2B). Citigroup paid ¥1.6T for Nikko Cordial in January 2008. The Nikkei newspaper says a deal will be announced by the end of the week.
  • IBM, Brocade deepen ties. IBM (IBM) and Brocade Communications Systems (BRCD) are strengthening their relationship, and IBM will rebrand ethernet switching and routing products made by Brocade as IBM products and sell them to mutual corporate customers. The move comes amid increasing rivalry between IBM and Cisco (CSCO).
  • Swine flu fears continue. The World Health Organization raised its alert level to phase 4 as suspected cases of swine flu rose worldwide, and said containment of the outbreak is not feasible. Fears about the possible pandemic pushed down share prices of travel stocks for the second day in a row.
  • Amazon buys e-book firm. Amazon (AMZN) added to its growing portfolio of e-book offerings with the acquisition of Lexcycle Inc., a company that makes a popular e-book reading application for the iPhone (AAPL). Terms of the deal were not disclosed.
  • McDonald's reaches drinks deals. Dr. Pepper Snapple Group (DPS) and Coca-Cola (KO) reached deals with McDonald's (MCD) to give the beverage companies' brands a wider presence in McDonald's stores.

Earnings: Tuesday Before Open

  • AGCO (AG): Q1 EPS of $0.36 beats by $0.13. Revenue of $1.6B (-11.6%) in-line. Shares -0.7% premarket (8:20 ET). (PR)
  • American Greetings (AM): FQ4 EPS of $0.26 beats by $0.01. Revenue of $442.5M (-10.3%) vs. $467.3M. (PR)
  • Becton, Dickinson and Co. (BDX): FQ2 EPS of $1.18 beats by $0.02. Revenue of $1.74B (-0.4%) vs. $1.76B. (PR)
  • Bemis (BMS): Q1 EPS of $0.43 beats by $0.09. Revenue of $843M (-11%) vs. $873M. Reaffirms FY '09 guidance, sees EPS of $1.50-$1.70. (PR)
  • Bristol-Myers Squibb (BMY): Q1 EPS of $0.48 in-line. Revenue of $5.0B (+2.5%) vs. $5.1B. (PR)
  • Celanese (CE): Q1 EPS of $0.08 beats by $0.18. Revenue of $1.15B (-37.9%) vs. $1.25B. (PR)
  • Coca-Cola Enterprises (CCE): Q1 EPS of $0.20 beats by $0.15. Revenue of $5.05B (+3.2%) vs. $4.86B. Issues upside guidance for FY '09, sees EPS of $1.24-$1.29 vs. $1.20 consensus. (PR)
  • Coventry Health Care (CVH): Q1 EPS of $0.30 beats by $0.05. Revenue of $3.6B (+21.5%) vs. $3.4B. Sees FY '09 EPS of $1.70-$1.90, revenue of $13.59B-$13.99B. (PR)
  • EarthLink (ELNK): Q1 EPS of $0.30 beats by $0.03. Revenue of $199M (-24.3%) vs. $203M. (PR)
  • EMCOR Group (EME): Q1 EPS of $0.55 beats by $0.22. Revenue of $1.4B (-16.1%) vs. $1.5B. (PR)
  • FirstMerit (FMER): Q1 EPS of $0.36 beats by $0.09. (PR)
  • FPL Group (FPL): Q1 EPS of $0.90 beats by $0.13. Revenue of $3.7B (+7.9%) vs. $3.6B. Issues upside EPS guidance for FY '09 of $4.20-$4.40 vs. $4.06 consensus. Issues upside EPS guidance for FY '10 of $4.65-$5.05 vs. $4.56 consensus. (PR)
  • HCP Inc. (HCP): Q1 EPS of $0.50 misses by $0.03. Revenue of $252M (+2.8%) vs. $256M. (PR)
  • Hecla Mining (HL): Q1 EPS of $0.02 beats by $0.08. Revenue of $55M (+45.9%) vs. $48M. Shares -3.8% premarket (8:10 ET). (PR)
  • Hospira (HSP): Q1 EPS of $0.60 beats by $0.05. Revenue of $860M (-3.3%) vs. $859M. Issues in-line guidance for FY '09, sees EPS of $2.67-$2.72 vs. $2.67 consensus. (PR)
  • Interpublic Group of Companies (IPG): Q1 EPS of -$0.16 beats by $0.04. Revenue of $1.3B (-10.8%) in-line. (PR)
  • Lazard (LAZ): Q1 EPS of $0.26 misses by $0.57. Revenue of $273M (-20%) vs. $342M. "We have accelerated our major global hiring initiative at the senior level. We are reinforcing our areas of strength, investing in areas of growth, developing new products, containing costs and maintaining liquidity, in order to take advantage of current and future opportunities. Our planning is to have significantly improved revenues during the second half of the year." (PR)
  • Level 3 Communications (LVLT): Q1 EPS of -$0.08 in-line. Revenue of $980M (-10.3%) vs. $1.03B. (PR)
  • McGraw-Hill Companies (MHP): Q1 EPS of $0.20 beats by $0.02. Revenue of $1.15B (-5.7%) in-line. (PR)
  • Nexen (NXY): Q1 EPS of $0.26 beats by $0.13. Revenue of $1.05B (-44%) vs. $1.36B. (PR)
  • Office Depot (ODP): Q1 EPS of -$0.10 in-line. Revenue of $3.22B (-18.6%) vs. $3.26B. (PR)
  • Paccar (PCAR): Q1 EPS of $0.07 beats by $0.02. Revenue of $1.7B (-52.2%) vs. $1.9B. (PR)
  • Petro-Canada (PCZ): Q1 EPS of $0.23 misses by $0.15. Cuts 2009 capex by $600M to $3.4B. Announces a quarterly dividend of $0.20 per common share. (PR)
  • Pfizer (PFE): Q1 EPS of $0.54 beats by $0.05. Revenue of $10.87B vs. $11.08B. Sees full-year EPS of $1.85-1.95 vs. consensus of $1.95 and revenue of $44-46B vs. $46.1B. (PR)
  • Potlatch (PCH): Q1 EPS of $0.72 beats by $0.14. Revenue of $130M (+15.1%) vs. $112M. (PR)
  • Rockwell Collins (COL): FQ2 EPS of $1.03 beats by $0.05. Revenue of $1.1B (-4%) in-line. Issues downside guidance for FY '09, sees EPS of $3.70-$3.90 vs. previous guidance of $4.10-$4.30. See FY '09 revenues of about $4.5B vs. $4.68B consensus. Shares -3.5% premarket (7:40 ET). (PR)
  • Scotts Miracle-Gro Company (SMG): FQ2 EPS of $1.25 beats by $0.01. Revenue of $960M (+0.2%) vs. $1.0B. Issues downside guidance for FY '09, sees EPS of $2.20-$2.30. (PR)
  • Tellabs (TLAB): Q1 EPS of $0.05 beats by $0.02. Revenue of $362M (-22.1%) vs. $359M. (PR)
  • Valero Energy (VLO): Q1 EPS of $0.59 beats by $0.09. Revenue of $13.8B (-50.5%) vs. $19.9B. Shares +2.5% premarket (8:00 ET). (PR)
  • Vishay Intertechnology (VSH): Q1 EPS of -$0.16 beats by $0.01. Revenue of $449.5M (-38.7%) vs. $470.6M. (PR)
  • Waddell & Reed Financial (WDR): Q1 EPS of $0.22 beats by $0.02. Revenue of $177M (-24.5%) vs. $185M. (PR)
  • Waters Corp. (WAT): Q1 EPS of $0.74 beats by $0.16. Revenue of $333M (-10.4%) vs. $338M. (PR)

Earnings: Monday After Close

  • Albemarle (ALB): Q1 EPS of $0.28 in-line. Revenue of $487M (-27.2%) vs. $559M. (PR)
  • Axis Capital (AXS): Q1 EPS of $1.05 misses by $0.06. Revenue of $715M vs. $786M. (PR)
  • Baidu.com (BIDU): Q1 EPS of $0.86 beats by $0.10. Revenue of $119M (+41.5%) vs. $116M. Shares +3.4% AH. (PR)
  • Compass Minerals (CMP): Q1 EPS of $1.85 misses by $0.29. Revenue of $309M (-18.7%) vs. $384M. Expects weak potash sales through Q2, but says they may pick up in H2. Shares -7.1% AH. (PR)
  • DaVita (DVA): Q1 EPS of $0.92 beats by $0.01. Revenue of $1.45B (+7.7%) in-line. Reiterates operating-income guidance. (PR)
  • Emulex (ELX): FQ3 EPS of $0.05 beats by $0.01. Revenue of $78.6M (-38.5%) vs. $80.7M. Sees FQ4 EPS of $0.01-0.05 vs. consensus of $0.06 and revenue of $73-80M vs. $82.7M. Shares +2% AH. (PR)
  • Fidelity National Financial (FNF): Q1 EPS of -$0.06 misses by $0.18. Revenue of $1.36B (+20.4%) vs. $1.48B. Shares -0.2% AH. (PR)
  • Hanesbrands (HBI): Q1 EPS of $0.03 beats by $0.08. Revenue of $858M (-13.2%) vs. $871M. Shares -5.4% AH. (PR)
  • Health Management Associates (HMA): Q1 EPS of $0.15 beats by $0.03. Revenue of $1.19B (+3.1%) in-line. Provision for bad accounts was $144M (12.1% of net revenue) vs. $129M (11.2%) a year ago. Shares -1.2% AH. (PR)
  • Hexcel (HXL): Q1 EPS of $0.24 beats by $0.05. Revenue of $307M (-10.8%) vs. $334M. "Our previous planning assumption for flat to modest growth seems too optimistic and we are redoubling our efforts to manage costs." Shares +2.8% AH. (PR)
  • Jacobs Engineering Group (JEC): FQ2 EPS of $0.88 misses by $0.01. Revenue of $2.98B (+11.7%) vs. $3.13B. Sees full-year EPS of $3.10-3.50 vs. $3.59 consensus. (PR)
  • Masco (MAS): Q1 EPS of $0.23 misses by $0.11. Revenue of $1.82B (-25.8%) vs. $1.88B. Full-year EPS guidance in-line. Sees full-year sales down 20-25% vs. a previous mid-to-high teens decline. Shares -1% AH. (PR)
  • Meritage Homes (MTH): Q1 EPS of -$0.60 beats by $0.58. Revenue of $231M (-37.8%) vs. $201M. (PR)
  • Olin (OLN): Q1 EPS of $0.60 misses by $0.03. Revenue of $401M (+0.4%) vs. $458M. Shares -4% AH. (PR)
  • Plum Creek Timber (PCL): Q1 EPS of $0.95 beats by $0.01. Revenue of $470M (+29.5%) vs. $506M. Full-year guidance in line. (PR)
  • SL Green Realty (SLG): Q1 EPS of $1.48 in-line. Revenue of $196.5M (+1.4%) vs. $213M. Shares -8.4% AH. (PR)
  • Southwestern Energy Company (SWN): Q1 EPS of $0.36 beats by $0.05. Revenue of $541M (+3.2%) vs. $450M. Shares +1.1% AH. (PR)
  • United States Steel (X): Q1 EPS of -$3.84 misses by $2.15. Revenue of $2.75B (-47.1%) vs. $3.14B. "Continues to face an extremely difficult global economic environment." Cuts dividend to $0.05 from $0.30. Will offer 18M shares and $300M in notes to pay back debt. Shares -7.4% AH. (PR)
  • Weingarten Realty (WRI): Q1 FFO of $0.77 beats by $0.17. Revenue of $149.3M (-1.5%) vs. $146.2M. Shares +2.3% AH. (PR)
  • W.R. Berkely (WRB): Q1 EPS of $0.25 misses by $0.12. Revenue of $964M vs. $1.11B. (PR)
  • XL Capital (XL): Q1 EPS of $0.63 misses by $0.01. Revenue of $1.53B vs. $1.88B. Sold more than 70% ($1.3B) of the securities related to its Q4 restructuring charge. Shares -5.2% AH. (PR)

Today's Markets

Overseas markets moved lower Tuesday.

  • Asia: Nikkei -2.67% to 8,494. Hang Seng -1.92% to 14,555. Shanghai -0.19% to 2,401. BSE -3.25% to 11,012.
  • Europe at midday: London -2.1%. Paris -2.1%. Frankfurt -2.5%.
  • Futures: Dow -1.4% to 7893. S&P -1.6% to 843. Nasdaq -1.3%. Crude -2.8% to $48.75. Gold -1% to $898.90.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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