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Thursday, July 30, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Reactions to Microhoo. Reactions to the Microsoft (MSFT) and Yahoo (YHOO) search deal announced yesterday have been mixed. Some investors wondered why Yahoo agreed to a deal with no upfront fee, after previously saying any deal would be conditioned on 'a boatload of cash,' and doubts about the deal's benefits to Yahoo helped pull shares down 12% (Microsoft closed up 1.4%, and the deal may mark an important turning point for CEO Steve Ballmer). Still, others felt "dropping the dead weight of search isn’t a horrible idea" for a company that has no realistic chance of beating Google (GOOG). The deal could face antitrust concerns but will likely be approved.
  • TARP exit for AmEx. American Express (AXP) has officially exited TARP after repurchasing warrants from the government for $340M. The company said the warrant buyback, along with $74.4M of dividend payments it made, provided taxpayers with an annualized 26% return. Analysts noted the repurchase price was in line with the $1.1B Goldman Sachs (GS) paid, indicating the Treasury has indeed taken a tougher negotiating stance on the warrant purchases in light of congressional pressure.
  • FDIC to break up banks. In an effort to entice more buyers, the FDIC is poised to start breaking up failed banks into good and bad pieces. The goal is to sell the most distressed parts of failed banks to private equity firms and other investors that are willing to take a larger risk on bad assets. The 'good' pieces of failed banks, including deposits and branches, could then be sold to traditional banks.
  • Sanofi buys out Merck's JV stake. Sanofi-Aventis (SNY) agreed to buy Merck's (MRK) half of their joint Merial animal-health venture for $4B in cash, and said the companies may work together again in the future to form the world’s largest maker of animal treatments. Sanofi and Merck had collaborated on Merial for over ten years, building it into a company with $2.6B in annual sales. The deal should help Merck allay antitrust concerns over its proposed purchase of Schering-Plough (SGP). Premarket: SNY -0.9% (7:00 ET).
  • Mortgage fraud probe includes Goldman, Deutsche. A Senate panel reportedly subpoenaed financial firms including Goldman Sachs (GS) and Deutsche Bank (DB) in search of evidence of mortgage fraud during last year's market meltdown. The probe is focused on whether bankers had private doubts about the financial soundness of the mortgage-related securities they were publicly promoting. Washington Mutual, now largely owned by JPMorgan Chase (JPM), may also have been among the firms that received a subpoena.
  • Citi advances asset sales. Citigroup (C) is 'moving extremely fast' on asset sales, said CEO Vikram Pandit. Citigroup announced today it had agreed to sell its stake in a Japanese asset management unit to Sumitomo Trust & Banking, Japan’s fifth-largest bank, for ¥112.4B ($1.18B).
  • New help for homeowners. The White House is planning to announce new guidelines today to help homeowners struggling with Federal Housing Administration-insured mortgages. The guidelines will narrow the gap between the FHA's mortgage-modification program and the White House's foreclosure-prevention plan, and will "offer borrowers an opportunity to stay in their homes, make payments that are manageable and defer [payment of] the money owed to a later time when, hopefully, home values have improved."
  • Fidelity signs IPO pact with Deutsche. Fidelity Investments struck a deal with Deutsche Bank (DB) allowing Fidelity's individual investors to participate in initial public offerings underwritten by Deutsche as of this week. Fidelity reached a similar deal last month with private equity group Kohlberg Kravis Roberts, but the Deutsche deal carries more weight because Deutsche is one of the 10 busiest underwriters of stock offerings in the U.S. For Deutsche, access to Fidelity's customers will broaden the range of IPOs it can land.
  • Beige Book sees recession moderating. The Federal Reserve's Beige Book was released yesterday, and noted the recession seems to be growing less severe. Some regions said the downturn's pace has moderated, and others reported that activity is stabilizing. Retail sales are still sluggish, and wages and benefits are steady or falling in most districts. (Read the Fed's Beige Book summary)
  • China seeks to reassure on monetary policy. In a volatile day of trading, Chinese stocks managed to close up 1.7% after China's central bank released a statement aimed at calming jittery investors. After the Chinese stock market fell 5% on Wednesday, its largest daily drop in eight months, the central bank pledged to maintain loose monetary policy in order to support an economic recovery and to ensure sustainable credit growth, seemingly without relying on a strict, central bank-directed quota system used in the past.
  • Boeing gets squeezed. British Airways (BAIRY.PK) is pressuring Boeing (BA) to renegotiate installment payments on its 787 Dreamliner orders. Predelivery payments can total tens of millions of dollars per jetliner, and as airlines find it increasingly difficult to bankroll the payments, plane makers like Boeing are getting squeezed. In other bad news for Boeing, a contractor said yesterday that the Dreamliner's braking system is still incomplete because of a dispute over who should pay for the work, and S&P downgraded Boeing's credit rating by one notch over concerns of additional production cuts due to airline order deferrals and cancellations.
  • PennyMac a few pennies short on IPO. PennyMac Mortgage Investment Trust, the distressed-mortgage investment company run by former Countrywide No. 2 Stanford Kurland and 10 other former Countrywide officials, raised $320M in its initial public offering, $80M less than planned. The company sold 16M shares at $20 each.

Earnings: Thursday Before Open

  • Aon (AOC): Q2 EPS of $0.76 beats by $0.02. Revenue of $1.9B (-4%) in-line. (PR)
  • AstraZeneca (AZN): Q2 EPS of $1.64 beats by $0.24. Revenue of $8B (+0%) vs. $7.8B. Shares +3.5% premarket (6:40 ET). (AstraZeneca's press release (.pdf))
  • Becton, Dickinson and Co. (BDX): FQ3 EPS of $1.30 beats by $0.06. Revenue of $1.8B (-2%) in-line. (PR)
  • CIGNA (CI): Q2 EPS of $1.14 beats by $0.18. Revenue of $4.5B (-8%) vs. $4.8B. (PR)
  • Covidien (COV): FQ3 EPS of $0.74 beats by $0.08. Revenue of $2.5B (-3%) in-line. (PR)
  • Dow Chemical (DOW): Q2 EPS of $0.05 beats by $0.14. Revenue of $11.3B (-40%) vs. $13B. (PR)
  • Iron Mountain (IRM): Q2 EPS of $0.25 beats by $0.02. Revenue of $746M (-3%) vs. $741M. (PR)
  • KBR Inc. (KBR): Q2 EPS of $0.42 beats by $0.01. Revenue of $3.1B (+17%) vs. $2.9B. (PR)
  • Kimco Realty (KIM): Q2 EPS of $0.31 misses by $0.01. Revenue of $189M (+3%) in-line. (PR)
  • Mack-Cali Realty (CLI): Q2 EPS of $0.87 beats by $0.06. Revenue of $173M (-3%) vs. $167M.
  • Mylan (MYL): Q2 EPS of $0.32 beats by $0.02. Revenue of $1.3B (+5%) vs. $1.2B. (PR)
  • Newell Rubbermaid (NWL): Q2 EPS of $0.47 beats by $0.12. Revenue of $1.5B (-18%) in-line. (PR)
  • NYSE Euronext (NYX): Q2 EPS of $0.51 beats by $0.06. Revenue of $1.1B (+9.5%) in-line. (PR)
  • Regal Entertainment Group (RGC): Q2 EPS of $0.26 misses by $0.03. Revenue of $789M (+17%) vs. $769M. (PR)
  • Royal Dutch Shell (RDS.A): Q2 EPS of $0.62 vs. consensus of $0.93 (may not be comparable). Revenue of $63.9B (-51%) vs. $60.5B. Shares -0.65% premarket (6:50 ET). (PR)
  • Taiwan Semiconductor (TSM): Q2 EPS of $0.14 beats by $0.01. Revenue of $2.2B (-23%) in-line. (PR)
  • Travelers (TRV): Q2 EPS of $1.26 misses by $0.02. Revenue of $6.2B (-2%) in-line. (PR)
  • Tyco International (TYC): FQ3 EPS of $0.58 beats by $0.13. Revenue of $4.2B (+0.6%) vs. $4.3B. (PR)

Earnings: Wednesday After Close

  • AFLAC (AFL): Q2 EPS of $1.20 beats by $0.06. Revenue of $4.3B (flat) vs. $4.7B. Announced planned acquisition of Continental American for $100M. (PR)
  • Agnico-Eagle Mines (AEM): Q2 EPS of $0.01 misses by $0.11. Revenue of $139M (+58%) vs. $126M. EPS includes noncash currency loss of $0.12/share and stock option expense of $0.03/share. (PR)

  • Akamai Technologies (AKAM): Q2 EPS of $0.40 misses by $0.01. Revenue of $205M (-2.7%) vs. $211M. (PR)

  • Amkor Technology (AMKR): Q2 EPS of $0.05 beats by $0.06. Revenue of $507M (-27%) vs. $472M. Sees Q3 sales up 17-21% from Q2. (PR)
  • Assurant (AIZ): Q2 EPS of $1.63 beats by $0.38. Revenue of $2.27B (+1%) vs. $2.16B. (PR)
  • AvalonBay Communities (AVB): Q2 FFO of $0.90 misses by $0.26. Revenue of $222M (flat) vs. $216M. (PR)
  • Bare Escentuals (BARE): Q2 EPS of $0.21 beats by $0.01. Revenue of $133M (-4%) vs. $131M. (PR)
  • Biomed Realty Trust (BMR): Q2 FFO of $0.48 beats by $0.08. Revenue of $86M (+22%) vs. $90M. Sees full-year FFO of $1.64-1.68 vs. $1.61. (PR)
  • Cadence (CDNS): Q2 EPS of -$0.05 beats by $0.03. Revenue of $210M (-32%) in-line. Sees Q3 EPS of -$0.01 to $0.01 vs. -$0.06. Sees full-year EPS of -$0.20 to -$0.08 vs. -$0.26. (PR)
  • Callaway Golf Company (ELY): Q2 EPS of $0.12 in-line. Revenue of $302M (-17%) vs. $301M. (PR)
  • CB Richard Ellis Group (CBG): Q2 EPS of $0.04 in-line. Revenue of $956M (-27%) vs. $953M. (PR)
  • Cerner (CERN): Q2 EPS of $0.55 in-line. Revenue of $404M (flat) vs. $422M. (PR)
  • Cliffs Natural Resources (CLF): Q2 EPS of $0.36 vs. -$0.34. Revenue of $390M (-61%) vs. $561M. (PR)
  • CommScope (CTV): Q2 EPS of $0.67 beats by $0.06. Revenue of $784M (-28%) vs. $835M. Sees Q3 revenue of $750M-800M vs. $878M. (PR)
  • Crown Castle International (CCI): Q2 EPS of -$0.41 beats by $0.04. Revenue of $410M (+8%) vs. $405M. (PR)
  • Duke Realty (DRE): Q2 FFO of $0.29 misses by $0.07. Revenue of $352M (+15%) vs. $218M. (PR)
  • Equity Residential (EQR): Q2 FFO of $0.58 beats by $0.04. Revenue of $1B (flat) vs. $0.5B. (PR)

  • Express Scripts (ESRX): Q2 EPS of $0.88 beats by $0.02. Revenue of $5.5B (-0.5%) in-line. Sees full-year EPS of $3.72-3.82 vs. consensus of $3.58, citing strong underlying fundamentals in the core business. (PR)

  • Fiserv (FISV): Q2 EPS of $0.90 beats by $0.02. Revenue of $1B (-20%) in-line. (PR)

  • Flextronics International (FLEX): FQ1 EPS of $0.08 beats by $0.02. Revenue of $5.78B (-30.4%) vs. $5.55B. "While stabilization of demand has improved, we expect a muted economic recovery in the near term." (PR)

  • Flowserve (FLS): Q2 EPS of $1.92 beats by $0.13. Revenue of $1.1B (-6%) vs. $1.2B. (PR)
  • FMC Corp. (FMC): Q2 EPS of $1.10 misses by $0.05. Revenue of $700M (-13%) vs. $738M. Sees full-year EPS of $4.00-4.20 vs. $4.60; sees Q3 EPS of $0.85-0.95 vs. $1.15. (PR)
  • Genco Shipping & Trading Ltd. (GNK): Q2 EPS of $1.20 beats by $0.06. Revenue of $94M (-10%) vs. $91M. (PR)
  • Goldcorp (GG): Q2 EPS of $0.14 misses by $0.01. Revenue of $629M (flat) vs. $575M. (PR)
  • Green Mountain Coffee Roasters (GMCR): FQ3 EPS of $0.36 beats by $0.08. Revenue of $191M (+61%) vs. $194M. Raises full-year EPS to $1.10-1.14 from $0.98-1.02. Sees full-year revenue growth of 58-61%. (PR)
  • Hanesbrands (HBI): Q2 EPS of $0.42 beats by $0.06. Revenue of $986M (-8%) vs. $980M. (PR)

  • Hartford Financial (HIG): Q2 EPS of $1.90 beats by $0.74. Sees full-year EPS of $0.00-0.20 vs. consensus of -$0.21. Book value +33% from Q1 to $32.20. (PR)

  • Helix Energy (HLX): Q2 EPS of $0.94 vs. $0.26. Revenue of $495M (-7%) vs. $520M. (PR)
  • Highwoods Properties (HIW): Q2 FFO of $0.70 beats by $0.06. Revenues of $113M. (PR)
  • Lam Research (LRCX): Q2 EPS of -$0.45 beats by $0.01. Revenue of $218M (-62%) vs. $202M. (PR)
  • Lincoln National (LNC): Q2 EPS of $0.81 misses by $0.02. Revenue of $2B (-22%) vs. $2.5B. (PR)
  • LSI Logic (LSI): Q2 EPS of $0.01 beats by $0.03. Revenue of $521M (+8%) vs. $506M. (PR)
  • MasTec (MTZ): Q2 EPS of $0.25 beats by $0.02. Revenue of $388M (+27%) vs. $376M. (PR)
  • O'Reilly Automotive (ORLY): Q2 EPS of $0.62 beats by $0.07. Revenue of $1.25B (+78%) vs. $1.23B. Sees full-year EPS of $2.09-2.13 vs. $1.97. (PR)
  • Owens-Illinois (OI): Q2 EPS of $0.94 beats by $0.04. Revenue of $1.8B (-18%) in-line. (PR)
  • Realty Income (O): Q2 FFO of $0.46 in-line. Revenue of $82M (-1%) in-line. (PR)
  • Ryland Group (RYL): Q2 EPS of -$1.70 misses by $0.66. Revenue of $272M (-44%) vs. $305M. (PR)

  • Symantec (SYMC): FQ1 EPS of $0.34 misses by $0.01. Revenue of $1.44B vs. $1.49B. Sees FQ2 EPS of $0.32-0.34 vs. $0.36. (PR)

  • Teradyne (TER): Q2 EPS of -$0.21 beats by $0.03. Revenue of $170M (-47%) vs. $127M. Sees Q3 EPS of -$0.02 to $0.02 vs. -$0.18. Sees Q3 revenue of $190M-205M vs. $157M. (PR)
  • Tesoro (TSO): Q2 EPS of -$0.33 beats by $0.07. Revenue of $4.2B (-53%) vs. $5.4B. (PR)
  • Trinity Industries (TRN): Q2 EPS of $0.43 beats by $0.16. Revenue of $716M (-24%) vs. $676M. (PR)
  • United Rentals (URI): Q2 EPS of -$0.24 misses by $0.06. Revenue of $615M (-26%) vs. $624M. (PR)
  • Universal American (UAM): Q2 EPS of $0.27 beats by $0.02. Revenue of $1.25B (+0%) vs. $1.33B. (PR)
  • Varian Medical Systems (VAR): FQ3 EPS of $0.68 beats by $0.04. Revenue of $510M (flat) vs. $533M. (PR)
  • Visa (V): FQ3 EPS of $0.67 beats by $0.03. Revenue of $1.65B (+2%) in-line. (PR)
  • Whiting Petroleum (WLL): Q2 EPS of $0.06 beats by $0.33. Revenue of $230M (-33%) vs. $192M. (PR)

Today's Markets

Stock markets posted gains in Asia, and are trending up in Europe. U.S. futures are following suit.

  • In Asia, Nikkei +0.5% to 10,165. Hang Seng +0.5% to 20,234. Shanghai +1.7% to 3,322. BSE +1.4% to 15,388.
  • In Europe at midday, London +1.2%. Paris +1.2%. Frankfurt +0.45%.
  • Futures: Dow +0.7%. S&P +0.8%. Nasdaq +0.7%. Crude +1.2% to $64.10. Gold +0.6% to $933.20.

Thursday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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