Tuesday, August 11, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby


  • Resolution's friendly takeover. Life insurer Friends Provident (FRDPY.PK) agreed to be acquired by buyout group Resolution for a revised £1.86B ($3.1B) bid. This is Resolution's first major acquisition as it seeks to lead a consolidation in the U.K. insurance sector. The agreement comes after Friends' H1 report of a £98M loss and a forecast that the rest of 2009 will remain "challenging given the uncertain pace of recovery in the U.K. economy."
  • Small banks may need more money. The Congressional Oversight Panel will release a report today that smaller U.S. banks may still need new capital, possibly as much as $12-14B, to cover troubled loans. While large banks, particularly the 19 stress-tested ones, appear healthy enough to handle more losses, banks with assets of $600M-$1B could face serious challenges, and the report recommends that the Treasury consider expanding programs to help banks with bad assets.
  • Judge withholds approval for BoA settlement. A federal judge refused to approve a $33M settlement between the SEC and Bank of America (BAC) over bonuses given out to Merrill Lynch employees, saying he was unable to determine if it was fair to the public because of a lack of transparency. The judge asked for a "much more detailed account of the underlying facts" as a prerequisite to his approval, suggesting the $33M might not be 'remotely reasonable' if Bank of America lied about bonuses, as the SEC alleges.
  • State Street's legal trust runs low. State Street (STT) said it may not have set aside enough money to cover its legal costs, including fees and penalties over lawsuits and investigations connected to risky investments. State Street had set aside $625M two years ago, and had $193M left in reserves at the end of June. The company declined to elaborate or say whether it plans to adjust the reserve.
  • Barnes & Nobles buys college bookstore. Barnes & Noble (BKS) is buying sibling Barnes & Noble College Booksellers Inc. from chairman Leonard Riggio for $596M in order to boost its customer base and its revenue. The two companies had operated independently since Barnes & Noble went public in 1993. Barnes & Noble College Booksellers has 624 bookstores on U.S. campuses and had revenue of $1.8B in its most recent fiscal year.
  • Southwest shows Frontier some love. Southwest Airlines (LUV) raised its bid for Frontier Airlines by 50% in a bankruptcy auction, hoping the $170M offer will stave off a competing bid from Republic Airways Holdings (RJET). If successful, Southwest will gain its first flight paths outside the U.S. and gain a foothold in the highly competitive Denver market.
  • Facebook makes a friend. Facebook agreed to buy FriendFeed, netting itself both a social media startup that lets users share content online in real time across various social networks and a prized group of former Google (GOOG) engineers. FriendFeed is similar to Twitter, though significantly less popular. Terms of the deal were not disclosed.
  • BoJ holds rate steady. As expected, Bank of Japan kept its key interest rate unchanged at 0.1%. The bank said it "can’t be confident about the strength of final demand after inventory adjustments and policy measures run their course," and remains concerned about "downside risks to economic activity and prices" even as the country's recession shows signs of abating.
  • Employment trends. Conference Board's Employment Trends Index registered at 88.3, unchanged from the previous month and down 20.1% from last year. Three months of a flat index "suggests that we are getting closer to the point when employers are no longer cutting their workforce. However... we do not expect significant job growth over the next year."

Earnings: Monday After Close

  • Fluor (FLR): Q2 EPS of $0.93 beats by $0.02. Revenue of $5.3B (-8%) vs. $5.8B. Shares -1.2% AH. (PR)
  • Force Protection (FRPT): Q2 EPS of $0.01 misses by $0.06. Revenue of $187M (-45%) vs. $166M. Shares -10.9% AH. (PR)
  • HRPT Properties Trust (HRP): Q2 FFO of $0.28 beats by $0.02. Rental income of $213M (+4%). (PR)
  • Matrixx Initiatives (MTXX): FQ1 EPS of -$2.49 vs. -$0.19 (one estimate). Revenue of $6.9M (-19%) vs. $9M. EPS includes $9M charge for recall of Cold Remedy products and $23M charge for impairment. Shares -10.3% AH. (PR)
  • McDermott International (MDR): Q2 EPS of $0.40 beats by $0.03. Revenue of $1.6B (-13%) in-line. Shares +1.8% AH. (PR)
  • Nuance Communications (NUAN): FQ3 EPS of $0.26 beats by $0.01. Revenue of $251M (+10%) vs. $250M. Shares -1.5% AH. (PR)
  • Quest Software (QSFT): Q2 EPS of $0.29 beats by $0.09. Revenue of $164M (-5%) vs. $165M. (PR)
  • Tw Telecom (TWTC): Q2 EPS of $0.04 beats by $0.01. Revenue of $301M (+4%) vs. $300M. (PR)

Today's Markets

The Nikkei closed at a ten-month high, with the rest of Asia closing up as well. European markets are mixed and U.S. futures are off to a weak start.

  • In Asia, Nikkei +0.6% to 10,585. Hang Seng +0.7% to 21,074. Shanghai +0.5% to 3,265. BSE +0.4% to 15,075.
  • In Europe at midday, London -0.3%. Paris +0.2%. Frankfurt -0.3%.
  • Futures: Dow -0.1%. S&P -0.1%. Nasdaq -0.2%. Crude +0.3% to $70.82. Gold +0.2% to $949.20.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.


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