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Friday, July 31, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Bank bonus bonanza. The bonuses paid out to executives at nine banks that received government bailouts exceeded the net income of some of the banks, according to New York Attorney General Andrew Cuomo, substantially so at Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan Chase (JPM). Cuomo said employee pay "has become unmoored from the banks' financial performance," and that there is "no clear rhyme or reason to the way banks compensate and reward their employees." Even during what was arguably one of Wall Street's worst years in memory, nearly 5,000 bankers and traders received a bonus above $1M. (Read Cuomo's report (.pdf))
  • Uncertain future for bank pay bill. Following the release of Cuomo's damning bonus report (see above), the House of Representatives will likely approve a bill requiring regulators to ban compensation practices that encourage 'inappropriate risks.' The Senate, however, and the White House are less enthusiastic about the measure, concerned it may give regulators too great a say on incentive pay.
  • Cash for clunkers grinds to a halt. The government has suspended its 'cash for clunkers' program just six days after it started. Meant to encourage new car purchases, the $1B program turned out to be far more popular than expected and has already run through its entire budget, blowing away lawmakers' estimates that the funds would last until November. Lawmakers are pushing for additional funding to help meet the program's larger-than-expected demand.
  • Ford stalls Volvo bidding. Ford has reportedly slowed down the bidding process for Volvo in an attempt to secure a better price for the unit. Ford apparently plans to wait until the sale of General Motors' Opel unit is complete, and will then invite the losing bidder to make a bid for Volvo, so nothing is likely to happen for another three to four weeks.
  • Troubled banks protest. Regulators have escalated the number of banks put on probation with so-called memorandums of understanding. At least 285 banks have received memorandums so far this year, compared to 399 for all of last year. Some of the targeted banks are complaining that the regulators are being too harsh, since the memorandums of understanding can force banks to increase their capital, overhaul management or take other major steps, but regulators say a tougher stance now could prevent failure later on.
  • Southwest wants to reach new frontiers. Southwest Airlines (LUV) unexpectedly bid $113.6M in a bankruptcy-court auction for smaller carrier Frontier Airline Holdings, potentially setting the stage for a bidding war with Republic Airways Holdings, a holding company for three regional airlines which bid $108.75M. If Southwest is successful, it will boost its presence in the highly-competitive Denver market and give the airline its first international destinations, but will also raise questions about Southwest's ability to stick to its low-cost business model.
  • Pre, iPhone probe to focus on skipped markets. A probe into wireless phone contracts will focus on markets where Apple's (AAPL) iPhone and Palm's (PALM) Pre are unavailable, with Julius Genachowski, the chairman of the Federal Communications Commission, asking whether such lack of availability is "consistent with broad consumer interests." The FCC will also investigate whether competition is hindered by exclusive agreements between phone makers and service providers.
  • No magic for Disney. Disney (DIS) failed to impress when it reported quarterly earnings yesterday (see details below), missing revenue expectations and narrowly beating earnings expectations on heavy cost-cutting. CEO Bob Iger told analysts that the company sees "signs of economic stabilization, but the pace and strength of the recovery remain uncertain." (Read Disney's earnings call transcript)
  • Delphi set to exit Ch. 11. Delphi won court approval to sell its assets to lenders and General Motors. The auto-parts supplier is now set to exit bankruptcy protection after nearly four years.
  • Jobless claims rise. Initial Jobless Claims came in at 584K, up 25K from a week ago (revised), and worse than the 575K consensus. Continuing claims fell 54K to 6.197M.

Earnings: Friday Before Open

  • American Electric Power Company (AEP): Q2 EPS of $0.68 beats by $0.07. Revenue of $3.2B (-8.6%) vs. $3.63B. (PR)
  • Anglo American (AAUK): H1 net profit of $2.97B (-30.6%), well outpacing consensus of $859M. Revenue of $11.13B vs. $17.92B a year ago. Says it "expects demand to remain soft in the near term until developed countries begin economic recovery." (DJ)
  • AutoNation (AN): Q2 EPS of $0.29 beats by $0.05. Revenue of $2.61B (-28.8%) vs. $2.8B. "Having weathered the storm, AutoNation remains in an excellent position to capitalize on dealer consolidation and the gradual recovery in industry volumes." (PR)
  • Calpine (CPN): Q2 EPS of -$0.16 vs. consensus of +$0.18. Revenue of $1.47B (-48%) vs. $1.72B. (PR)
  • Constellation Energy Group (CEG): Q2 EPS of $1.08 beats by $0.32. Revenue of $3.86B (-18.8%) vs. $3.57B. Sees full-year EPS of $3.10-3.30 vs. $3.01 consensus. (PR)
  • ITT Industries (ITT): Q2 EPS of $1.06 beats by $0.26. Revenue of $2.78B (-9.3%) in-line. Sees full-year EPS of $3.50-3.70 vs. $3.44 consensus. (PR)
  • Snap-On (SNA): Q2 EPS of $0.65 beats by $0.07. Revenue of $590M (-23%) in-line. (PR)
  • Total (TOT): Q2 net profit of €2.17B, less than half of €4.73B last year. Adjusted profit of €1.72B (-54%), in line with consensus. Sales of €31.43B (-35%). European refining margins narrowed 69% from a year ago. (DJ)

Earnings: Thursday After Close

  • ARIAD Pharmaceuticals (ARIA): Q2 EPS of -$0.24 beats by $0.01. Licensing and collaboration revenue of $2.1M. (PR)
  • Ariba (ARBA): FQ3 EPS of $0.17 beats by $0.01. Revenue of $84M (-1%) in-line. (PR)
  • Arris Group (ARRS): Q2 EPS of $0.27 beats by $0.05. Revenue of $279M (-1%) vs. $281M. (PR)
  • BioMarin Pharmaceutical (BMRN): Q2 EPS of $0.09 beats by $0.10. Revenue of $83M (+29%) vs. $78M. (PR)
  • Camden Property Trust (CPT): Q2 FFO of $0.78 beats by $0.03. Revenue of $157M (+1%) vs. $141M. (PR)
  • Community Health Systems (CYH): Q2 EPS of $0.66 beats by $0.06. Revenue of $3B (+13%) in-line. (PR)
  • Disney (DIS): FQ3 EPS of $0.52 beats by $0.01. Revenue of $8.6B (-7%) vs. $8.8B. (PR)
  • DryShips (DRYS): Q2 EPS of $0.25 beats by $0.04. Revenue of $210M (-30%) vs. $204M. (PR)
  • DTE Energy Company (DTE): Q2 EPS of $0.56 beats by $0.41. Revenue of $1.7B (-25%) vs. $2B. (PR)
  • Dun & Bradstreet (DNB): Q2 EPS of $1.21 in-line. Revenue of $417M (+1%) vs. $425M. Issues downside full-year EPS guidance, to up 1-5% from up 9-12%. Lowers full-year revenue guidance to -1% to +1%, from +2-5%. (PR)
  • Evergreen Solar (ESLR): Q2 EPS of -$0.11 misses by $0.03. Revenue of $64M (+180%) vs. $63M. (PR)
  • Exelixis (EXEL): Q2 EPS of -$0.42 misses by $0.01. Revenue of $27.4M (-10%) vs. $33.4M. (PR)
  • First Solar (FSLR): Q2 EPS of $2.11 beats by $0.49. Revenue of $526M (+97%) vs. $459M. (PR)
  • Genworth Financial (GNW): Q2 EPS of -$0.11 misses by $0.27. Revenue of $2.5B (+4%) vs. $2.6B. (PR)
  • Geron (GERN): Q2 EPS of -$0.23 misses by $0.04. Revenue of $183,000 (-8%) vs. $800,000. (PR)
  • Harmonic (HLIT): Q2 EPS of $0.03 in-line. Revenue of $81M (-9%) vs. $75M. (PR)
  • HLTH Corp. (HLTH): Q2 EPS of $0.04 beats by $0.08. Revenue of $99M (+15%) in-line. (PR)
  • Ingram Micro (IM): Q2 EPS of $0.15 misses by $0.05. Revenue of $6.6B (-25%) vs. $6.7B. (PR)
  • Las Vegas Sands (LVS): Q2 EPS of $0.01 beats by $0.02. Revenue of $1.1B (-5%) in-line. (PR)
  • McAfee (MFE): Q2 EPS of $0.60 beats by $0.03. Revenue of $469M (+18%) vs. $467M. (PR)
  • MetLife (MET): Q2 EPS of $0.88 beats by $0.20. Revenue of $8.4B (+4%) vs. $11.7B. (PR)
  • Mohawk Industries (MHK): Q2 EPS of $0.67 beats by $0.20. Revenue of $1.4B (-24%) in-line. Ex-restructuring charge EPS of $0.79. (PR)
  • Monster Worldwide (MWW): Q2 EPS of $0.03 beats by $0.02. Revenue of $223M (-37%) vs. $225M. (PR)
  • PDL BioPharma (PDLI): Q2 EPS of $0.47 beats by $0.04. Revenue of $126M (+18%) vs. $124M. Sees full-year revenue of $310M-325M vs. $331M. (PR)
  • PerkinElmer (PKI): Q2 EPS of $0.28 beats by $0.01. Revenue of $435M (-14%) vs. $460M. Sees full-year EPS of $1.18-1.22 vs. $1.27. (PR)
  • Pitney Bowes (PBI): Q2 EPS of $0.55 misses by $0.05. Revenue of $1.38B (-13%) vs. $1.43B. Sees full-year EPS of $2.15-2.35 vs. $2.46. (PR)
  • Silver Wheaton (SLW): Q2 EPS of $0.06 misses by $0.01. Revenue of $41M (-17%) vs. $53M. (PR)
  • Southwestern Energy Company (SWN): Q2 EPS of $0.35 in-line. Revenue of $478M (-21%) vs. $387M. Cuts full-year production view to 278-288 Bcfe from 289-292 Bcfe. (PR)
  • Stone Energy (SGY): Q2 EPS of $0.65 beats by $0.48. Revenue of $263M (-35%) vs. $129M. (PR)
  • Synaptics (SYNA): FQ4 EPS of $0.47 beats by $0.03. Revenue of $115M (+19%) vs. $112M. Announces retirement of CEO Francis Lee, succeeded by Thomas Tiernan. (PR)
  • Varian Semiconductor Equipment Associates (VSEA): FQ3 EPS of -$0.20 beats by $0.05. Revenue of $73M (-60%) vs. $69M. (PR)
  • Vistaprint (VPRT): FQ4 EPS of $0.43 beats by $0.04. Revenue of $135M (+22%) vs. $128M. Sees Q1 EPS of $0.32-0.35 vs. $0.40. (PR)
  • Weingarten Realty Investors (WRI): Q2 FFO of $0.61 beats by $0.11. Revenue of $147M (-4%) vs. $144M. (PR)
  • YRC Worldwide (YRCW): Q2 EPS of -$3.53 misses by $1.82. Revenue of $1.3B (-45%) vs. $1.6B. (PR)

Today's Markets

Asia markets were broadly higher Friday, Europe is mixed, and futures are up from yesterday's close.

  • Asia: Nikkei +1.89% to 10,357. Hang Seng +1.68% to 20,573. Shanghai +2.72% to 3,412. BSE +1.83% to 15,670.
  • Europe at midday: London flat. Paris +0.1%. Frankfurt -0.1%.
  • Futures: Dow +0.5% at 9083. S&P +0.4% to 981. Nasdaq +0.3%.
    Crude -0.1% at $68.88. Gold +0.2% to $939.50.
    30-year Tsy future +0.21%. 10-year +0.19%. 5-year +0.13%. 2-year +0.03%.
    Euro +0.4% vs. dollar. Yen flat. Pound +0.4%.

Friday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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