Tuesday, August 4, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • BoA's Lewis closer to exit. Bank of America (BAC) reshuffled its senior management yesterday, replacing the head of consumer banking with Brian Moynihan, who had previously run wealth management, and hiring Sallie Krawcheck as the new wealth management chief. The bank is also setting up a five-way competition for a new CEO to replace Ken Lewis "at the appropriate time," with candidates including Moynihan, who is the front runner for the position, Krawcheck, CFO Joe Price, home-lending chief Barbara Desoer and Goldman Sachs veteran Tom Montag. Shares -1.4% premarket (7:00 ET). (Read BoA's press release)
  • BoA settles Merrill suit. Bank of America (BAC) agreed to a $33M settlement with the SEC over charges that it made false and misleading statements to investors about bonuses at Merrill Lynch. The settlement was announced almost immediately after the allegations, which the bank neither confirmed nor denied, but the SEC emphasized it will continue its investigation. Though the $33M payment is high for disclosure-related cases not connected to fraud, the fine seems small compared to the $3.6B in bonuses paid at Merrill in 2008 and damages CEO Ken Lewis' once-golden reputation far more than BoA's bottom line. (Read the SEC's complaint (.pdf) and statement on the settlement)
  • No surprises from UBS loss. UBS (UBS) posted a Q2 net loss of 1.4B Swiss francs ($1.32B), its third consecutive quarterly loss, on costs related to job cuts and charges related to the company's debt. Its wealth and asset management divisions saw outflows of 39.4B francs. CEO Oswald Gruebel said markets improved in the second quarter but a sustainable economic recovery 'is not yet visible.' Shares -8.3% premarket (7:00 ET). (Read UBS' letter to shareholders (.pdf))
  • Bank regulators oppose financial reforms. Several top banking regulators, including the FDIC's Sheila Bair, will testify in Congress today against some key elements of Obama's proposed financial reforms. The regulators feel parts of Obama's plan are unnecessary, and Bair doesn't "see merit or wisdom in consolidating federal supervision" under a single regulator since combining agencies is 'no panacea' for effective oversight. The testimony comes in spite of strongly-worded exhortations from Geithner, who wants regulators to end their turf battles and public criticism and to get in line behind the reforms. (See the Senate's full list of witnesses for today's hearing)
  • Monday's market climb. The S&P 500 broke through the 1,000 mark for the first time since November, climbing 1.5% to close at 1,002.63, and the Nasdaq broke the 2,000 mark, closing up 1.5% at 2,008.61. All three major U.S. indexes, including the Dow Jones Industrial Average, are now at their highest levels since last autumn. Speculation that the recession may be ending helped commodities surge and sent Treasurys and the dollar down.
  • Google's Schmidt leaves Apple board. Google (GOOG) CEO Eric Schmidt resigned from Apple's (AAPL) board of directors, with Apple releasing a statement that "as Google enters more of Apple's core businesses... Eric's effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest." The resignation, which Apple described as mutual, highlights not just the growing overlap between Apple and Google, but also increased antitrust scrutiny from the Federal Trade Commission. The move failed to mollify the FTC, which said it "will continue to investigate remaining interlocking directorates between the companies."
  • ANZ picks up Asian assets. Australia and New Zealand Banking Group (ANZBY.PK) agreed to buy some Asian units from Royal Bank of Scotland (RBS) for around $550M. ANZ will pick up retail, wealth management and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong, as well as RBS' institutional banking businesses in Taiwan, the Philippines and Vietnam, as a 'further stepping stone' in the bank's Asian growth strategy.
  • Clunker program lifts car sales. July U.S. motor vehicle sales reached their highest pace in eleven months, thanks in large part to the 'Cash for Clunkers' program which sent consumers rushing to dealerships. Car firms sold 997,824 cars and light trucks in July, pushing the annualized selling pace to 11.24M vehicles vs. June's rate of 9.69M, and a slump in luxury auto demand showed signs of lessening. Here's the breakdown:
    -Ford (F): +2.3% to 158,838 vs. consensus of -5%, making it the first U.S. manufacturer to report a monthly sales increase this year.
    -Chrysler: -9% to 88,900. Car sales -14% to 22,109. Sales up 30% M/M. "We are seeing encouraging signs that consumer confidence is building, and more consumers are considering purchasing a new vehicle."
    -General Motors: -19.4% to 189,443. Chevrolet was the best-performing brand at -9.3% to 124,948. Saturn, the worst performer, was -66.1% to 5,968.
    -Honda (HMC): -17.3% to 114,690. Truck sales -20.6% to 37,996.
    -Toyota (TM): -11.4% to 174,872, up 27.7% M/M. Lexus division -16.5% to 18,517. Hybrids +19.3% to 24,295.
    -Nissan (NSANY): -24.6% to 71,847. Trucks -48.4% to 20,448.
    -Daimler (DAI): -24% to 17,646 for the Mercedes-Benz car division.
    -Volkswagen (VLKAY.PK): +0.7% to 20,590. Diesels accounted for more then 30% of total sales.
  • CIT sweetens buyback offer. CIT Group (CIT) raised its tender offer on $1B in notes to a purchase price of $875 per $1,000, up from $825. CIT also lowered its minimum tender condition to 58% of notes, and has already received tenders for 64.97% of notes. The improved terms all but guarantee the buyback's success, pulling CIT one step farther away from bankruptcy court. (Read CIT's press release)
  • AIG gets new chief. Robert Benmosche will become CEO and President of AIG (AIG), replacing Edward Liddy as of August 10. Benmosche is the former CEO of MetLife (MET), and will be AIG's fifth chief since 2005.
  • Manufacturing still contracting. The ISM Manufacturing Index came in at 48.9 in July vs. 46.5 consensus, its 18th consecutive month of contraction. Nonmetallic Mineral Products and Paper Products reported growth. Machinery, Plastics & Rubber Products, and Wood Products led the laggards.
  • Construction spending inches up (.pdf). June Construction Spending rose 0.3% to $966B/year, beating consensus estimates of -0.5%. Compared to a year ago, construction was down 10.2%. For the first half of the year, spending of $456B was 11.4% below last year.

Earnings: Tuesday Before Open

  • Archer Daniels Midland (ADM): FQ4 EPS of $0.10 vs. consensus of $0.45 (may not be comparable). Revenue of $16.5B (-24%) vs. $15.2B. (PR)
  • Cognizant Technology Solutions (CTSH): Q2 EPS of $0.50 beats by $0.13. Revenue of $777M (+13%) vs. $762M. Issues upside Q3 guidance: sees EPS of $0.44 vs. $0.39 consensus, revenue of at least $800M vs. $781M consensus. (PR)
  • CVS Caremark (CVS): Q2 EPS of $0.65 beats by $0.01. Revenue of $25B (+18%) vs. $24B. (PR)
  • Discovery Communications (DISCA): Q2 EPS of $0.43 beats by $0.11. Revenue of $881M (-0.5%) in-line. (PR)
  • D.R. Horton (DHI): FQ3 EPS of -$0.45 misses by $0.22. Revenue of $922.5M (-43%) vs. $792M. (PR)
  • Emerson Electric Company (EMR): FQ3 EPS of $0.56 misses by $0.01. Revenue of $5.1B (-22.5%) vs. $5.3B. (PR)
  • Entergy (ETR): Q2 EPS of $1.23 misses by $0.03. Issues in-line guidance for FY '09, sees EPS of $6.20-6.80 vs. $6.56 consensus. (PR)
  • Expeditors International of Washington (EXPD): Q2 EPS of $0.25 in-line. Revenue of $895M (-38%) vs. $999M. (PR)
  • Frontier Communications Corporation (FTR): Q2 EPS of $0.11 misses by $0.02. Revenue of $532M (-5%) vs. $534M. (PR)
  • Henry Schein (HSIC): Q2 EPS of $0.81 beats by $0.05. Revenue of $1.6B (-2%) in-line. (PR)
  • Marvel Entertainmnet (MVL): Q2 EPS of $0.37 beats by $0.06. Revenue of $116M (-26%) vs. $106M. (PR)
  • PPL (PPL): Q2 EPS of $0.32 misses by $0.08. Revenue of $1.7B (+65%) in-line. (PR)
  • Spectra Energy Corp. (SE): Q2 EPS of $0.22 beats by $0.02. Revenue of $937M (-17%) vs. $1.1B. (PR)
  • W&T Offshore (WTI): Q2 EPS of -$0.07 beats by $0.41. Revenue of $150M (-67%) vs. $138M. (PR)

Earnings: Monday After Close

  • Anadarko (APC): Q2 EPS of -$0.48 beats by $0.20. Revenue of $1.8B (-37%) in-line. (PR)
  • Arena Pharmaceuticals (ARNA): Q2 EPS of -$0.48 beats by $0.01. Revenue of $2.4M (-8%) vs. $3.1M. (PR)
  • Atmel (ATML): Q2 EPS of $0.00 beats by $0.05. Revenue of $285M (-32%) vs. $279M. Sees Q3 sales up 4-8% sequentially. (PR)
  • Axis Capital (AXS): Q2 EPS of $1.22 beats by $0.05. Revenue of $781M (-4%) vs. $747M. (PR)
  • Centex (CTX): Q2 EPS of -$2.63 misses by $1.46. Including tax benefit, reported EPS of $0.68. Revenue of $574M (-49%) vs. $563M. (PR)
  • Chesapeake Energy (CHK): Q2 EPS of $0.62 beats by $0.11. Revenue of $1.7B vs. $1.9B. (PR)
  • Comstock Resources (CRK): Q2 EPS of -$0.26 in-line. Revenue of $65M (-62%) vs. $63M. (PR)
  • Extra Space Storage (EXR): Q2 FFO of $0.24 beats by $0.10. Revenue of $69M (+3%) vs. $67M. (PR)
  • Forest Oil (FST): Q2 EPS of $0.52 beats by $0.06. Revenue of $182M (-65%) vs. $240M. (PR)
  • Herbalife (HLF): Q2 EPS of $0.78 beats by $0.06. Revenue of $572M (-11%) vs. $550M. Sees Q3 EPS of $0.66-0.69 vs. $0.81. Sees Q3 revenue down 4-6%. (PR)
  • Hologic (HOLX): FQ3 EPS of $0.29 beats by $0.03. Revenue of $403M (-6%) vs. $395M. Sees full-year EPS of $1.14-1.16 vs. $1.12. (PR)
  • Principal Financial Group (PFG): Q2 EPS of $0.69 beats by $0.06. Revenue of $2.2B (-19%) vs. $2.5B. (PR)
  • Pulte Homes (PHM): Q2 EPS of -$0.74 misses by $0.17. Revenue of $679M (-58%) vs. $647M. (PR)
  • STEC (STEC): Q2 EPS of $0.42 beats by $0.08. Revenue of $86M (+54%) vs. $83M. Sees Q3 EPS of $0.45-0.47 vs. $0.39. Files to sell 7.5M shares of common stock. (PR)
  • WMS Industries (WMS): FQ4 EPS of $0.49 beats by $0.02. Revenue of $196M (+5%) vs. $197M. Sees full-year revenue of $760M-780M vs. $707M. (PR)

Today's Markets

Little movement in Asian markets, which closed mixed. European markets are heading down and U.S. markets are unlikely to sustain yesterday's gains.

  • In Asia, Nikkei +0.2% to 10,375. Hang Seng -0.05% to 20,796. Shanghai +0.3% to 3,471. BSE -0.6% to 15,831.
  • In Europe at midday, London -0.8%. Paris -0.7%. Frankfurt -0.8%.
  • Futures: Dow -0.6%. S&P -0.7%. Nasdaq -0.7%. Crude -1.3% to $70.65. Gold -0.3% to $955.90.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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