From Briefing.com: 5:05PM Market Internals : The Dow decreased -0.21%, closing at 11343, the Nasdaq was down -0.77% to finish at 2305, and the S&P declined -0.41% to finish at 1305. Leading sectors included: steel +4.62%, agriculture products +4.57%, photo products +3.07%, div mtls and min +2.99%, oil and gas +2.73%. Lagging sectors included: trucking -3.57%, home entertainment software -3.19%, specialized finance -2.87%, healthcare srvc -2.87%, investment bank and brkg -2.82%. Today's movement came from above average volume (NYSE 1731, vs. closing avg of 1599; Nasdaq 2142, vs. 2066), with lower advance/decline ratios (NYSE 1459/1790; Nasdaq 1151/1898), and with new high's outpacing new low's (NYSE 230/122, Nasdaq 183/51).
4:54PM Corning to expand generation 8 LCD glass production (GLW) 27.54 -.09 : Co announces its board of directors recently approved a capital expenditure plan of $174 mln to further expand its Generation 8 size liquid crystal display glass substrates manufacturing capacity at its facility in Shizuoka, Japan. The co had previously announced that it will ship samples of its Gen 8 size LCD glass from this facility in the second quarter. Co expects to begin Gen 8 commercial shipments in the third quarter, with this new capacity continuing to come on line through late 2007. In addition, co announced that it recently signed a supply agreement making co the majority glass substrate supplier for Sharp Corporation's Gen 8 fab in Mie Prefecture, which is currently under construction and expected to open later this year. Sharp's new Gen 8 factory will be focused on LCD TVs that are 40 inches and larger. Co's new investment will add Gen 8 glass capacity to meet Sharp's future supply requirements.
4:30PM Shanda Interactive appoints Daniel Zhang as Chief Financial Officer (SNDA) 12.38 +0.02 : Co announces that Shujun Li will resign as Sr VP and Chief Financial Officer of the co, effective June 30, 2006, to pursue other opportunities of personal interests. He will continue as a member of the Board of Directors. SNDA has promoted Daniel Zhang, the co's Financial Controller, to the CFO position effective upon Mr. Li's departure.
4:20 pm : Stocks closed lower Monday after CNBC reported that Fed Chairman Bernanke said the media misunderstood his congressional testimony last week.
Before the market opened, however, investors found some comfort after Wal-Mart (WMT 45.96 +0.93) reported a preliminary 6.8% rise in April same-store sales. That growth exceeded prior forecasts of 4-6% growth and set the stage for a plethora of retailers expected to report strong monthly figures later in the week. Also suggesting that high gas prices still aren't slowing down the consumer was a larger than expected 0.6% increase in March personal spending accompanied by the biggest increase (+0.8%) in personal income since September. The March core PCE deflator -- the Fed's primary inflation indicator, though, rose 0.3%. That was the largest increase since October and pushed the year-over-year increase to 2.0% from 1.8%, raising worries about mounting inflationary pressures.
More incoming economic data showed that overall construction activity had yet to slow down and that national manufacturing activity remains robust, exacerbating early nervousness among bond traders that initially failed to pour over into the equity markets since the reports only represented one month of data and reflected underlying economic strength. Nevertheless, renewed uncertainty over Fed policy going into the close, fueled by CNBC reporting that Bernanke said the market should see him as being "flexible, not dovish," lent some credence to our skeptical view about further tightening and that there is still no clear end in sight to the uptrend in interest rates.
Like we mentioned last week, we believe the market got too excited by Bernanke's testimony for the simple reason that a "pause" implies that there will be a subsequent rate hike. When it was all said and done Monday, the yield on the 10-yr note (-20/32) was near 4-year highs at 5.137%, weighing heavily on overall sentiment, especially the influential Financial sector. Without leadership from the rate-sensitive Financials, further consolidation in Technology, and the only significant buying support coming from two less influential sectors -- Energy and Materials -- that were also buoyed by rising commodities prices, concerns which play into our Neutral market view, the indices were unable to hold onto modest intraday gains. BTK -1.4% DJ30 -23.85 DJTA +0.1% DJUA -0.9% DOT -0.4% NASDAQ -17.78 NQ100 -0.8% R2K -0.4% SOX -1.0% SP400 +0.2% SP500 -5.42 XOI +1.5% NASDAQ Dec/Adv/Vol 1903/1139/2.09 bln NYSE Dec/Adv/Vol 1788/1469/1.73 bln
4:10PM Research In Motion Comments on Patent Complaint by Visto (RIMM) : Co says it has learned that a complaint alleging patent infringement has been filed in the U.S. Eastern District Court of Texas by Visto against RIMM. Visto is alleging infringement of four patents and seeking an injunction and monetary damages. Visto has already filed patent complaints against several companies in the industry, including MSFT, Good Technology, Smartner and Sproqit. RIMM has been monitoring Visto's litigation against other companies in the industry and, based on prior art and actual products in market, RIM believes Visto's patents are invalid. Further, Visto's patent claims as directed against Seven Networks refer to a different type of system than RIMM's technology. RIMM believes it does not infringe Visto's patents and will file its legal response in due course. In addition to challenging validity and infringement, RIMM will now also consider asserting its own patents against Visto. RIMM does not expect its customers to be impacted by Visto's complaint and, given the status of Visto's current litigation with other companies, it is unlikely that any material court proceedings in this litigation could begin prior to the middle of calendar 2007.
3:15PM Apple Computer makes security risk list - Red Herring (AAPL) 70.95 +.56 : Red Herring reports the co's operating system is not as secure as it used to be, with a computer security organization placing the Mac OS X on its top 20 list of Internet vulnerabilities on Monday, the first time a MAC OS has been featured in the ranking. The SANS Institute cited zero-day vulnerabilitiesâEuro”in which an attack causes damage before a vendor can issue a patchâEuro”in both the operating system and the Mac Safari Web browser. The list is released every six months. The SANS report comes after several problems for the Mac, once touted for its defense against hackers, viruses, and other attacks. Two viruses attacked the computers in February. That same month, a weakness in Safari was found to allow malware when users opened files containing movies, photos, or compressed data. To be sure, SANS researchers noted Macs are still safer than mainstream PCs. They also pointed out other security problems plaguing non-Apple products.
12:32 pm Wal-Mart (WMT)
46.29 +1.26: Well, if the consumer is feeling the pinch of rising gas prices, you'd never know it based on Wal-Mart's update that it expects April same-store sales to be up 6.8%. That is above the company's forecasted range of 4-6% and it compares favorably to a 0.9% increase in the year-ago period. The better comparison, however, is the 4.3% same-store sales increase registered in March 2005, as that period benefited from Easter-related sales that were seen this year in the month of April.
Any way you slice it, Wal-Mart's showing in April was strong and it stands as an anecdotal sign that job growth continues to drive consumer spending in the face of higher interest rates and rising energy prices. Furthermore, the better than expected performance from Wal-Mart is a telling indicator that the same-store sales reports from the retail community, in general, are likely to be above expectations when they are released later this week.
The latter consideration has propped up numerous retail stocks, such as Active Portfolio holdings Gap (GPS 18.19, +0.10) and Gymboree (GYMB 30.30, +0.22), in today's trading. Wal-Mart, for its part, is benefiting from its good news, but we suspect it won't be an easy climb from here. Although Briefing.com believes WMT is attractively-priced for the long-term investor, the near-term potential is apt to be limited so long as gas prices continue to rise as that will weigh on the discretionary spending capabilities of its core, low to middle-income customer and raise concerns about Wal-Mart meeting its full earnings potential in the months ahead.
--Patrick J. O'Hare, Briefing.com
11:46 am Comverse Technology (CMVT)
23.89 +1.24: Comverse Technology on Monday said its founder and two other senior executives have resigned amid an internal review relating to issues over the company's back-dating of stock option grants. Those executives stepping down include founder Kobi Alexander, who also served as Chairman and Chief Executive Officer, Chief Financial Officer David Kreinberg, and Senior General Counsel and Corporate Secretary William Sorin.
Last month, Comverse Technology said a special committee of the board of directors found some discrepancies in the recorded timing of past stock option grants. As a result, the company said it would delay the filing of its annual report and expects to restate its earnings results back to 2001.
On account of the resignations, Comverse named independent director Ron Hiram as non-executive chairman, independent director Raz Alon as interim CEO, and treasurer Avi Aronovitz as interim CFO. The departing executives, however, will still advise the company on an interim basis and cooperate with the probe into the company's stock option grants, Comverse said.
Based on the news, shares of Comverse have climbed more than 4% during the regular trading session, reflecting investors' positive sentiment over the company's move to quickly resolve the pending stock option investigation. According to research firm CIBC, "the changes are at the holding company level with no impact at the subsidiaries level." They noted that Zeevi Bregman who deserves a great part of the credit for putting Comverse back on the growth track remains the CEO of CNS (70% of revenues), and Dan Bodner remains the CEO of Verint (25% of revenues).
--Richard Jahnke, Briefing.com
10:40 am Tyson Foods (TSN)
14.64 +0.04: Tyson Foods, Inc. Monday reported a loss of $(0.26) per diluted share for the second fiscal quarter ended Apr. 1, 2006, compared to $0.21 diluted earnings per share in the same quarter last year. The figure for the most recent period excluded a ($0.11) loss due to site closings, and was a penny better than a Reuters Estimates consensus estimate for a loss of $(0.27) per share.
Second quarter 2006 sales were $6.3 billion compared to $6.4 billion for the same period last year. Operating loss was $141 million compared to operating income of $183 million, and net loss was $127 million compared to net income of $76 million for the same period last year. Pretax loss for the second quarter of fiscal 2006 included $59 million, or $0.11 per diluted share, of costs related to beef and prepared foods plant closings. Pretax earnings for the second quarter of fiscal 2005 included $2 million of costs related to poultry and prepared foods plant closings.
John Tyson, chairman and CEO of Tyson Foods, said in a press release that the period was tougher than the company had anticipated. He said the quarter's results reflect depressed markets and the oversupply of all proteins. The beef segment, he said, suffered from low capacity utilization and declining boxed beef prices. The negative effect of high live cattle prices and lower sales prices was made worse by interruptions in export markets, he said.
On the upside, the company's sales volume increased and the chicken segment stayed in positive territory. The company's focus on value-added products and effective management of controllable costs helped the company's chicken segment's performance, Tyson said.
Tyson said he is encouraged by the prepared foods segment margins which, when adjusted for plant closings, "continue to move in the right direction." In addition, the impact of the oversupply of protein is expected to diminish in the second half of the year, he said. The company expects the third and fourth quarters to be better as demand improves, but Tyson said in the press release that the periods "still will be difficult."
Based upon the company's outlook for fiscal year 2006, including its view of all the various markets, the company now estimates its fiscal 2006 diluted earnings per share to be in the range of $(0.25) to $0.10. The consensus estimate is currently pegged at a profit of $0.03 per share, according to Reuters Estimates.
--Christine Marie Nielsen, Briefing.com
10:07 am Humana (HUM)
44.47 -0.71: Humana said Monday its first quarter profits fell 22% due to the introduction of the company's Medicare prescription drug plans, as well as higher Medicare sales, marketing, and service infrastructure costs, but expects full year year earnings and revenue to grow more than 50% from 2005. In the quarter, the Louisville, Kentucky-based health insurer posted earnings of $83.7 million, or $0.50 per share, down from $106.7 million, or $0.65 per share, a year earlier. Excluding one-time items, the company's earnings were $0.39 per share - four cents shy of the Reuters Estimates consensus of $0.43 per share.
Revenue for the period grew 39% year/year to $4.7 billion, with total premium and administrative services fees up 37%. Humana attributed the increase to higher enrollment in the company's Medicare Advantage plans and the introduction of stand alone prescription drug plans. Membership in Humana's Medicare Advantage plans rose to 741,200, up 291,300 from a year ago. The company expects membership to grow to 900,000 to 1.1 million by the end of the year. Humana said membership its stand alone Medicare drug plans totaled 1.96 million and expects that to grow to 2.7 to 2.9 million by year's end.
Meanwhile, the company's medical expense ratio of 83.7% was flat year/year, as cost improvements in the commercial segment was offset by a higher expense ratio in the government segment. Selling, general, and administrative expenses ratio increased to 16.1% in the quarter from 14.3% a year earlier, primarily due to expenses associated with the Medicare expansion.
Looking ahead, Humana said it was on track to achieve the objectives that will produce 50% growth in both earnings and revenue in fiscal 2006, reaffirming our Overweight rating on the Health Care sector. The company predicted full year earnings of $2.71 to $2.77 per share, ex-items, on revenue of $21 to $22 billion. Analysts on average are looking for earnings of $2.74 per share and revenue of $21 billion, according to Reuters Estimates.
--Richard Jahnke, Briefing.com
09:18 am Boeing (BA)
83.45: Boeing has agreed to buy airplane-parts distributor Aviall Inc (AVL) for $1.7 billion. The move corresponds with James McNerney's plan to drive productivity and profitability by expanding its highly-profitable services unit. The deal gives Boeing a distribution network and an Internet-based service that connects aviation parts buyers and sellers around the globe. Aviall will become part of the commercial aviation services segment in Seattle, which generated 9% revenue growth from sales of parts and services totaling $9 billion last year.
There has been much speculation that McNerney, Boeing's third CEO in three years, may expand into the highly lucrative spare parts business, and thus, integrate Boeing into part of the supply chain for aircraft. While Boeing paid a 27% premium to AVL's closing price on Friday, the deal should be warmly welcomed by the market. This is the first major deal for McNerney since he took over the job in July and most likely will not be his last. McNerney came to Boeing battle-tested in improving margins, which coupled with the continued success in the Commercial Aerospace business, underscores our enduring positive view on the stock.
--Kimberly DuBord, Briefing.com
09:07 am Sysco (SYY)
29.89: Sysco Corp.'s fiscal third-quarter profit declined 14%, hurt by fuel costs and a stock-option expense. For the quarter ended April 1, profit fell to $188.5 million, or $0.30 per share, including a $0.04 cent stock-option expense, compared with $218.2 million, or $0.34 per share during the company's third quarter last year. The latest quarter's results missed a Reuters Estimates consensus estimate of $0.32 per share. The company said revenue grew 9% to $8.14 billion from $7.44 billion last year.
Richard Schnieders, Sysco's chairman, chief executive officer and president, noted in a press release that the company continued to experience expense pressures in the third quarter, most notably fuel and share-based compensation expenses. In addition, during last year's third quarter Sysco benefited from the reversal of an $11 million accrual for an income tax contingency, making this year's third quarter comparison difficult.
"Throughout the past 39 weeks our operating companies have done a terrific job in the face of challenging expense pressures,'' Schnieders said. "We expect our fourth quarter will also contain similar headwinds. After that, however, those pressures should lessen, if not disappear, as we anniversary the many added expense items we've encountered this year. By remaining focused on our proven and successful strategies to drive sales growth, market share gains and earnings, Sysco is positioned for strong and sustainable growth.''
The food service distributor's 9.4% sales growth for the latest quarter includes sales from non-comparable acquisitions of 1.4%. Third quarter sales growth also includes inflation, as measured by the 2.0% change in Sysco's cost of goods. Sysco's operating companies increased customer contact staffing by approximately 5% in the latest period.
In February, the Houston-based Sysco acquired Desert Meats, the largest independent specialty meat supplier in Las Vegas, Nevada, with calendar year 2005 sales of approximately $55 million. Sysco's FreshPoint subsidiary completed two acquisitions - City Produce and Thomas Brothers Produce - during the third quarter, further expanding the scope of Sysco's specialty produce operations.
Sysco will hold a conference call on its earnings report later this morning.
--Christine Marie Nielsen, Briefing.com
08:34 am Cameco Corp. (CCJ)
40.65: Call it a nuclear revival. Soaring energy prices have renewed interest in nuclear power generation. Nuclear power is being hailed as a means to diversify energy demand and to reduce greenhouse gas emissions caused by fossil fuels. This leads us to Cameco Corp., a Canadian company which accounts for 20% of the world's uranium. The Saskatoon, Saskatchewan-based mining company reported a glowing first quarter result, as net profits soared $91 mln to $117 mln, or 32 cents per share, on higher uranium price realizations and volumes.
Cameco's uranium business propelled the quarter, but it also benefited from improved results at its Bruce Power Limited Partnership (BPLP), which helped offset scheduled outages and higher operating expenses. Cash from operations was $286 mln, compared to $84 mln in the same period in 2005, reflecting revenue growth of 151% to $542 mln and the collection of accounts receivables due to the timing of sales. The uranium market yielded a 29% increase in price utilizations in the quarter bolstered by a strong Canadian dollar. Further, the company has been able to leverage the strong market conditions by locking in long-term contracts at prices higher than any time in its history, according to the press release. Uranium spot prices increased 79% to $38.96 over the prior year.
The uranium business generated EBIT of $89 mln, from $7 mln last year, with a profit margin of 34% up from 15%. Volumes rose 179% to 12 mln pounds, which is unusual and reflects the timing of customer requests for delivery. The company noted continued difficulties in expanding production. Also due to lower production and grades at Kumtor, as well as Centerra, CCJ reduced its full year production estimates from 729,000 ounces to 680-695k. Despite challenges, higher uranium prices are forecasted to produce full year revenue growth of 50% and gross margins of 32% from 23% in the prior year. Even though valuations are a bit rich on a historical comparison, CCJ will continue to trade at a premium to its peers considering the rise in uranium prices, uranium market outlook, limited investment alternatives, and a rising nuclear energy market.
--Kimberly DuBord, Briefing.com
10:02 am Nautilus Grp: BB&T Capital Mkts initiates Buy. Target $20. Firm notes that the co is scheduled to report Q1 EPS on May 3 after the market close, and they expect EPS to be in-line with guidance. Firm also believes the stock is attractively valued to growth potential and its 2005 problems are on track to be corrected by late 2006.
10:01 am Express Scripts: First Analysis Sec upgrades Equal-Weight to Overweight. Target $88. Firm notes that last Wednesday the co reported very strong March qtr results, yet despite the performance the stock sold off over 9% last Thursday, based on what firm believes were unrealistic expectations for another "beat-and-raise" qtr -- and a valuation that reflected that. Firm believes the potential for expectations-beating results exists, but in 2H06 when generic drugs, the integration of Priority Healthcare, and growth from Medicare PDPs impact earnings in a meaningful way.
10:01 am TECO Energy: BB&T Capital Mkts upgrades Underweight to Hold. Firm ups on the basis of valuation. The firm says their change in rating coincides with a reduction in their 2006 and 2007 estimates after review of Q1 results announced last week, they note that all of the downward revision relates to synfuel earnings, and even after considering a slightly lower NPV for the co's synfuels. Their sum-of-the-parts value suggests a value of $15-$16.
10:00 am Lesco: Dougherty & Company downgrades Buy to Neutral. Firm cuts rating on stock following softer than expected March results. Firm believes that co's stores segment is raising risk that investor earnings expectations are tracking ahead of fundamental performance. Firm believes sales productivity and store segment operating costs are raising this risk. While the firm still believes the co is on track to deliver earnings acceleration, firm suspects their earnings expectations and the Street consensus expectations moved ahead of the co's fundamental performance.
09:59 am Frontline: Jefferies & Co downgrades Buy to Hold. Firm also downgrades General Maritime (GMR), Teekay Shipping (TK), and TORM (TRMD) to Hold from Buy saying they believe the shares are currently fairly valued. They also downgraded Knightsbridge Tankers (VLCCF) to Sell from Hold saying the shares are overvalued. The firm believes most tanker stocks with significant spot market exposure are currently fairly valued given their outlook for a weakening charter rate environment in 2006 and 2007.
09:59 am U.S. Steel: KeyBanc Capital Mkts / McDonald upgrades Hold to Buy. Target $90. Firm is saying they are restoring the positive investment thesis on X shares based on improving operational execution, further strengthening of industry momentum, and the potential for enhanced shipment growth over the next several quarters.
09:58 am Big 5 Sports: UBS upgrades Neutral to Buy. Firm is saying that they believe shares of the co appear well positioned to rebound over the next several months. Firm believes that BGFV is now at an inflection point where it moves past one-time expenses and begins to leverage its new ditribution infrastructure. Firm states that there are several factors that support their positive view: 1) potential for EPS growth to accelerate as co moves past one-time costs and begins to leverage is new larger DC; 2) negative investor sentiment already factored into stock; 3) improving cash flow; 4) history of solid execution; and 5) an attractive share value.
09:57 am Nice Systems: CE Unterberg Towbin reiterates Buy. Target $56 to $64. Firm ups price target given Nice's impressive history of integrating acquisitions and potential upside to what they believe to be conservative guidance for 2006.
09:51 am Huntsman: BB&T Capital Mkts downgrades Hold to Underweight . Firm downgrades following news that the co's Port Arthur, TX, olefins manufacturing plant had a major fire on Saturday; the plant is significantly damaged and the operation is shut down for pending investigations. They believe the HUN outage will likely to benefit other cos such as Lyondell Chemical (LYO), NOVA Chemicals (NCX), and The Dow Chemical Company (DOW). |
