From Briefing.com: 4:16PM Advanced Micro intends to offer approx $500 mln of its common stock (AMD) 35.47 -0.23 : Co announces it intends to offer an aggregate of approx $500 mln of its common stock. AMD also intends to grant the underwriter a 30-day option to purchase an additional aggregate of approx $75 mln of its common stock to cover overallotments, if any. MER will be the sole underwriter for this offering. AMD intends to use approx $226 mln of the net proceeds from this offering to fund the redemption of up to 35% of the aggregate principal amount of its 7.75% Senior Notes due 2012 and the balance of the net proceeds for capital expenditures, working capital and other general corporate purposes, including the possible repayment of indebtedness.
4:03PM KLA-Tencor withdraws offer for August Technology (KLAC) 51.77 +0.15 : Co annoucnes it has withdrawn its February 2005 offer to acquire August Technology (AUGT) for $11.50 per share in cash. The co noted its disappointment that the two companies were unable to enter into substantive discussions and reach a final agreement.
4:20 pm : While gains remained moderate Monday, equities rebounded from sharp selling action that sunk Friday's market. Buyers eyed bargains left in the wake of last week's average 2.6% drop in the indices, and some positive news on the corporate front helped provide incentive to snatch them.
The ten economic sectors stood in split fashion for most of the session. Despite retreats in prices across the energy complex, the Energy sector (+1.1%) managed to attract further buying interest and led the advancers. Oil services stocks paved the way higher, as SLB enjoyed follow-through interest following its much better than expected fourth quarter report, and as investors optimistically await result from BJS. As a side note, the latter is one of Briefing.com's suggested holdings for active investors, and is scheduled to report prior to Tuesday's open. Although declines in energy prices were a positive for the broader market today, the fact that supply-related geopolitical concerns (Iran) persist worked to somewhat undercut the declines' effects.
Largely to the credit of a soaring brokerage industry, Financials were stocks' strongest source of support. Upside profit results from Dow component American Express (AXP 51.47 +0.07) were released ahead of schedule and, especially in light of some recent disappointments across both the sector and the Dow, lent further muscle. Along that line, Bank of America (BAC 53.94 -0.25) fell $0.08 short of analysts' earnings estimate this morning. Its subsequent decline was kept in check, though, as investors perhaps acknowledge that Wall Street's estimates on many stocks are too high amid a decelerating earnings growth environment, and that BAC remains attractive on account of its growth prospects, dividend yield, and valuation.
Benefiting from across-the-board jumps in metal stocks, Materials (+1.3%) was also a bright spot today. Following its GE-induced plunge on Friday, Industrials (+0.2%) recovered; Utilities (+0.1%) also closed higher. Facing relative weakness in drug retail, which surging Albertson's shares helped to offset, the Consumer Staples sector ended the day on the flat line. This morning, the grocer agreed to a $17.4 billion buyout led by CVS (CVS 26.67 -0.46), Supervalu, and private equity firm Cerberus. The Discretionary sector similarly closed unchanged. The auto industry led today's S&P, following a much better than expected Q4 report alongside details of an aggressive turnaround plan from Ford (F 8.33 +0.43), but declines across the retail arena and the aforementioned oil overhang challenged its effect.
While buying efforts were generally modest, selling action was even more so. A wavering Technology sector finished 0.3% lower and led the laggards; Intel (INTC 21.37 -0.39) was the primary culprit, and its extended weakness eclipsed some relative strength across the semiconductor industry. Recovered Yahoo (YHOO 34.20 +0.46) and Apple (APPL 77.64 +1.55) shares were particular sources of support that helped limit the sector's slide, however. Reports that the U.S. Supreme Court denied Research in Motion's (RIMM 64.25 -2.37) petition to review a patent infringement ruling added to the Nasdaq's rocky day, but rebounding GOOG shares helped counter that challenge. With respect to RIMM's woes, the news served as a bullish cue for rival Palm (PALM 33.61 +0.41).
Today's economic front featured just a slightly lower than expected read on leading indicators. Investors within both the stock and bond markets essentially overlooked the dated (December) data, though, and remain focused upon the week's housing data and Q4 GDP report. DJ30 +21.38 NASDAQ +0.77 SP500 +2.33 NASDAQ Dec/Adv/Vol 1388/1645/1.93 bln NYSE Dec/Adv/Vol 1206/2077/1.64 bln
12:45PM Varian Semi receives follow-on orders from major Taiwanese foundry for its VIISta single wafer high current ion implanters (VSEA) 47.93 -0.22 : Co announces it has received multiple follow-on orders for its VIISta HC single wafer high current ion implanter from a major foundry in Taiwan. The tools are expected to ship to production fabs in this quarter.
10:27AM Applied Micro and Nimbus Data Systems establish strategic partnership for I.P storage reference designs (AMCC) 2.79 +0.00 : The co and Nimbus Data Systems announce the establishment of a strategic partnership to develop I.P storage reference designs for leading server and storage O.E.Ms. These new products will enable AMCC's customers to accelerate their development of industry-leading iSCSI storage systems built around AMCC's embedded PowerPC processors and Nimbus storage software.
11:50 am Research In Motion (RIMM)
65.19 -1.43: Shares of Research in Motion traded lower on Monday after the U.S. Supreme Court turned down a petition by the maker of the popular Blackberry email device to review a patent infringement ruling against the company. Resultantly, the high court's refusal to hear the appeal in the long running infringement case could result in an injunction to stop U.S. Blackberry sales and service.
In 2002, patent holding firm NTP Inc. successfully sued RIMM over the intellectual property rights over the company's Blackberry communication device. Although RIMM and NTP subsequently reached an agreement to settle the dispute, whereby RIMM would pay NTP $450 million for past damages related to the technology infringement and a license to continue selling the handheld device, an impasse was reached in June when NTP failed to uphold the terms of the agreement. RIMM, subsequently, looked for a federal appeals court to enforce the agreement; however, the lower court concluded that RIMM infringed on NTP's patents and that the companies did not have a valid enforceable settlement.
An injunction against RIMM would effectively shut down U.S. Blackberry sales and service, and significantly disrupt the company's overall operations. While this remains a real threat and is negative news for RIMM shareholders, the company will likely be forced to settle with NTP for as much as $1 billion, according to some analysts. Conversely, competitors such as Palm (PALM) and Motorola (MOT) should benefit from any disruption in sales and service for the company's popular handheld device, as continued uncertainty surrounding the pending legal settlement remains a significant overhang.
--Richard Jahnke, Briefing.com
10:56 am Walt Disney (DIS)
25.34 -0.38: This story should be titled "Finding Pixar." A year ago, the market was speculating Disney might lose its lucrative distribution deal with Pixar amid frosty dealings between Eisner and Jobs. Today Disney's board plans to meet to consider buying Pixar Animation Studios (PIXR) - a considerable turn of events. After just four months on the job, Robert Iger is close to magically turning Disney's animation studio back into the showcase it used to be.
While a deal has yet to be announced, Reuters reported Monday morning that Disney's board of directors is meeting to consider the deal, which would give Steve Jobs a predominant position on Disney's board. Certainly not a wallflower, Jobs's presence will likely shake things up at the studio, which may not be a bad thing considering his leadership and visionary qualities. A source familiar with the matter said it is not clear whether the board was prepared to vote on a proposed merger.
In an unrelated matter, Disney may also be near a deal to sell its ABC radio unit. Iger has certainly been busy fulfilling promises he has made after taking over as CEO. The New York Times reported Disney is close to a deal to sell its ABC Radio unit to Citadel Broadcasting (CDL) for $3 bln. After receiving numerous offers, DIS selected Citadel's offer and began negotiations. Iger has long promised to rid Disney of these non-core assets, which have been a drag on shares.
We have long said a deal with Pixar would be a feather in Iger's cap, not to mention a perfect fit for both companies. The market has reacted overwhelmingly positive to a possible animation merger. While the numbers floating around are still purely speculative, the deal is worth a potential $7 bln - Disney's largest in a decade. If the merger does not come to fruition, we would likely see a distribution deal at a minimum. Disney is firing on all cylinders with ABC producing top rated shows, and attendance rising at its theme parks. Our near-term concern remains possible dilution caused by an all stock deal. With all that we know at this point, we remain committed to the stock as a suggest holding in our Active Portfolio.
--Kimberly DuBord, Briefing.com
10:44 am Energizer Holdings (ENR)
54.19 +4.76: Energizer Holdings on Monday reported mixed results for its fiscal first quarter as higher raw material costs and unfavorable pricing offset modest top-line growth. For the quarter ended December 31, 2005, the St. Louis-based company said it earned $120.5 million, or $1.77 per share, compared with $120.4 million, or $1.60 per share, a year earlier. Excluding a $3.1 million, or $0.05 per share, charge for the restructuring of the company's European supply chain, earnings were $1.82 per share. The results, however, were helped by a lower amount of shares outstanding versus the year ago period.
Revenue for the period increased $6.5 million, or 0.07%, to $882.4 million. At the same time, gross profit declined $6.8 million as unfavorable pricing and higher product costs outweighed an increase in sales volume. Analysts, on average, were expecting the company to post earnings of $1.45 per share on sales of $891.93 million, according to Reuters Estimates.
Higher sales in both the North America and International Battery segments were partially offset by lower sales in the Razors and Blades segment. North America battery sales rose 2% to $395.8 million, while international sales increased 4% to $270.5 million, despite unfavorable currency impacts and unfavorable pricing. In the Razor and Blades segment, sales fell 5% to $216.1 million compared to the same quarter last year, with currencies accounting for approximately $7.3 million of the decline. On a constant currency basis, though, sales were down 2% year/year as sales for the Quattro franchise increased 30%. However, declines in older technology products more than offset the increases.
The company said it expects to see benefits from its battery price increase, but higher material costs and the shift to larger package sizes are likely to offset at least a portion of any favorable pricing in the near term. Like other consumer products companies, Energizer has been under increased pressure to manage rising material costs in an extremely price sensitive environment. Although recent cost savings have supported results, margins could come under added pressure as slowing profitability in the battery segment, which accounts for about 70% of sales, outpaces improvements in the Schick business.
--Richard Jahnke, Briefing.com
10:37 am Ford (F)
37.24 +6.19: On August 4, 2003, The Sports Authority and Gart Sports Company, the largest and second largest U.S. sporting goods retailers, respectively, completed a merger that created the nation's largest full-line sporting goods chain. Today, the 19-year old company now operating 398 stores nationwide, which was initially acquired by Kmart (now Sears Holdings Corp) in 1990 (only nine stores in six states) and then spun-off in 1995 (136 stores in 26 states), agreed to go private in a buyout for $37.25 per share. The cash and debt deal worth about $1.3 bln, tabled by private equity firm Leonard Green & Partners LP and certain members of Sports Authority's senior management, represents a 20% premium to TSA's Friday's closing stock price of $31.05.
While the board of directors has unanimously approved a privatization, which would give TSA greater flexibility to accomplish its long-term goals, a deal expected to close in this year's second quarter is still subject to shareholder approval as well as other customary closing conditions. According to special committee chairperson Gordon Barker, "This transaction, which will provide Sports Authority's shareholders with an immediate and substantial cash premium for their investment in the Company, reflects the success of the merger and integration of the Company's predecessors Gart Sports and The Sports Authority." In accordance with the merger agreement, TSA will also be conducting a market test over the next 20 days to make sure the proposed deal is the best available for shareholders.
Acting as financial adviser for Sports Authority in connection with the merger transaction is Merrill Lynch (MER), underscoring our partiality to the investment bank & brokerage group as the most compelling investment opportunity within the Financial sector. With the volume of M&A activity surpassing the $1.0 trillion barrier in 2005 for the first time since 2000, strong balance sheets, CEO confidence, and the desire to increase efficiency and economies of scale through acquisition efforts, we expect 2006 to be another strong year of consolidation activity that is spearheaded by public and private entities alike.
--Brian Duhn, Briefing.com
10:00 am Nike (NKE)
83.41 -0.79: Taking the market by surprise Monday morning, Nike announced the resignation of chief executive officer, William Perez, after less than a year on the job. Due to "differences" with founder and chairman Phil Knight, Perez said Nike would be best suited if he resigned. The move comes only weeks after Nike said global orders of shoes and clothing for delivery between December and April rose at the slowest pace in two years due to weaker demand in Western Europe and Asia.
Perez, who took over for Nike's founder Phil Knight as CEO in December 2004, was initially selected over longtime co-presidents, Mike Parker and Charlie Denson, due to his experience at SC Johnson for building global brands and businesses. Parker, which developed the Nike Air shoe, will now take over as CEO, effectively immediately. Denson will take over sole responsibility of the brand.
Nike citied "differences" between Knight and Perez as the reasons behind the split. The baton exchange comes only weeks before the Olympics begin in Turin, Italy - a sporting event that provides an international showcase for Nike's products. In June, soccer fans will tune in worldwide to watch the World Cup with the opening game held on Adidas' turf in Munich, Germany. With Nike and Adidas holding roughly one-third share each of the European football market, both companies will face off head-to-head in competition for consumers' dollars this summer. Adidas is not only the official sponsor, but also clothes some of soccer's biggest stars, including England's David Beckham.
Nike's shares rose to a high of $91.54 in December, but have subsequently fallen off after the disappointing future orders results. As we have stated previosuly, we think Nike will remain on the winning team due to its market-leading innovation, multi-dimensional offering in both performance and lifestyle products, unequalled marketing prowess, and operational efficiencies all driving returns, but that we would prefer to wait for a pull back. Early indications show the stock trading down on the news. While the change will cause some management distraction, Parker, a long-time insider, appears better suited for the job.
--Kimberly DuBord, Briefing.com
09:12 am Albertson's (ABS)
24.11: A group of investors, including Supervalu Inc. (SVU) and CVS Corp. (CVS), on Monday agreed to purchase food and drugstore operator Albertson's for a total value of approximately $17.4 billion in cash, stock, and assumed debt, including the settlement of the Albertson's Hybrid Income Term Security units. Under the terms of the agreement, Albertsons' shareholders will receive $26.29 per share, representing a 9% premium over the company's closing price of $24.11 on Friday. That includes $20.35 in cash and a fixed exchange ratio of 0.182 shares of Supervalu stock for each share of Albertson's.
The deal comes about a month after negotiations between the companies were terminated on antitrust concerns, as well as a request by Albertson's for Supervalu's board to provide more stringent guarantees to ensure the closing of the deal. Albertson's, the nation's second largest traditional grocery store, owns and operates the Jewel, Acme, and Shaw's grocery stores and Sav-on Drugs and Osco Drug stores.
Under the renewed deal, Minneapolis-based Supervalu will acquire approximately 1,124 operating stores for about $6.3 billion in cash and stock and the assumption of $6.1 billion in Albertson's debt. The transaction makes Supervalu the second largest supermarket chain in the U.S. behind Kroger Co. (KR). CVS will pay about $2.9 billion for 700 stand-alone Sav-on and Osco Drug stores, as well as Albertson's ownership interests in the drug store real estate. Meanwhile, the remainder of the consortium, led by Cerberus Capital Management, will acquire 655 operating stores and 100% of the distribution centers and offices in Albertson's Dallas/Fort Worth division, and in the Florida, Northern California, Rocky Mountain, and Southwestern regions.
Given the increased competition and price pressures brought on by Wal-Mart (WMT), consolidation in the industry has been viewed as a necessity for the industry, as it would allow companies to better leverage overhead expenses and increase operational profitability in the near term. However, in the long run Wal-Mart's low price model will continue to put pressure on companies in this space. Briefing.com currently has a Market Weight rating on the Consumer Staples sector.
--Richard Jahnke, Briefing.com
09:04 am Ford (F)
7.90: In case reports of a comprehensive restructuring initiative weren't enough to ease shareholder anxiety over the weekend, Ford Motor Company has stunned Wall Street this morning after handily beating forecasts. Still facing a worrisome financial crisis in North America, margin compression tied to rising healthcare costs, market share erosion and bankruptcy uncertainty, analysts expected the nation's No. 2 auto maker to post just a penny of profit in the fourth quarter. However, after excluding multiple "special items" related to a $1.4 bln gain from the Hertz sale, a $1.3 bln impairment charge and personnel reduction charges, Q4 (Dec) earnings of $0.26 per share checked in $0.25 better than the Reuters Estimates consensus.
As expected, Ford's North America automotive operations continued to suffer, but a pre-tax loss of $143 mln was substantially reduced from the $470 mln lost in Q404. The company's Premier Automotive Group also continued to incur losses but reported a "pre-tax" profit of $46 mln, compared to a pre-tax loss of $255 mln in the year-ago period, due to the impact of new Land Rover products. Profitability in South America, Europe and Asia Pacific also helped Ford improve its overall bottom line.
Total automotive sales rose 7.6% year/year to $41.82 bln, better than the $37.68 bln consensus, as worldwide automotive revenue for 2005 rose 5.0% to $154.5 bln. According to Ford Chairman and Chief Executive Officer Bill Ford, "We accomplished many things in 2005, including the successful launch of the new Ford Fusion, Mercury Milan and Lincoln Zephyr, introduction of the company's new innovation initiative, completion of the sale of Hertz, and an agreement with the UAW to help reduce rising health care costs."
While Ford did not provide a financial outlook for 2006, executives are expected to present details at 10:30 ET of its "Way Forward" restructuring plan that will reportedly trim up to 30,000 jobs and eliminate at least 25% of its annual car- and truck-making capacity by closing 10 plants, as management keeps working to improve its business in each and every region.
Following declines of 47% and 8% in 2005 and 2004, respectively, Ford shares closed Friday up 2% for the year and are already up more than 5% in pre-market trading.
--Brian Duhn, Briefing.com
08:57 am Bank of America (BAC)
44.19: On the heels of a disappointing result from Citigroup, Bank of America's earnings came in even lower, as a surge of bankruptcy filings and rising interest rates weighed heavily in the fourth quarter. A new bankruptcy law that went into effect October 17th resulted in a windfall of credit losses to the tune of $524 mln - exceeding the company's own forecasts. Changes in practices for overdraft charge-offs and over limit credit card fees cut pre-tax profits by $320 mln. Net income fell to $3.77 bln, down from $3.85 bln in the prior year.
On a per share basis, earnings came in a full eight cents below what the market had been expecting. Revenues rose an anemic 3.2% $14.37 bln, versus the consensus estimate of $14.59. The disappointment was compounded further by a weak trading quarter. The bright spot in the quarter was commercial loan growth of 10% with average total loans rising 13% to $537 bln. There were over half a million Americans that filed for bankruptcy protection in the week before the law went into effect, which makes it more difficult to wipe off debts, compared to less than 30,000 in prior year, according to Lundquist Consulting. Bank of America's charge-offs in Q4 (basically bad loans) grew to $1.65 bln - up 43% quarter/quarter and 95% year/year!
Not only was BAC facing the bankruptcy issue, but the variance between long-term and short-term rates has narrowed considerably over the last year compressing margins. Rising interest rates are narrowing the spread between what banks pay on deposits and charge for loans, known as net interest margins. Bank of America's net interest margin contracted even further than most we've seen this quarter to 2.82% from 3.18% a year earlier. BAC, which paid $34.2 bln to acquire MBNA, will be able to offset some of the narrowing spread by charging higher interest rates for credit cards.
The market had been anticipating a challenging quarter for the consumer-weighted banks on the bank of the record level of bankruptcy filings. While today's results were less than ideal, the effects from the bankruptcy law change were one-time in nature. Actually, the legislative changes make it more difficult to file bankruptcy in the future, which will only help BAC going forward.
BAC shares already took a considerable hit on Friday following Citi's report. We would suggest investors take advantage of any further downside pressure today on the back of today's miss, as the stock remains a solid investment considering its growth prospects underpinned by recent acquisitions, an attractive dividend yield of 4.5%, and valuation. The stock is trading at 10.0x earnings - a 26% discount to the sector average.
--Kimberly DuBord, Briefing.com
10:28 am KB Home: JMP Securities downgrades Strong Buy to Mkt Outperform. Target $102 to $102. Given the sales trends seen by builders that have pre-announced orders for the December quarter, firm believes it is prudent at this time to adjust their estimates for KBH assuming the co will also see some of this slowdown in its orders in coming quarters. Similar to all builders, they also assume the co may face some margin pressure in 2H06 as pricing power decelerates and the use of incentives picks up. Firm cuts their FY06 & FY07 EPS ests.
10:28 am Altiris: Needham & Co upgrades Hold to Buy. Target $23. Upgrade is based on firm's view that 2006 should be a better year for margins and earnings growth after a transitional 2005. Firm believes the co's Q4 report will reflect continued fundamental improvement and stability in its relationship with HPQ. Looking forward, the firm believes continued OEM channel stability and incremental opportunities with its new virtualization product could drive better growth and margin expansion in 2006. Firm establishes a $23 target based on a 23x multiple.
10:26 am Pulte Homes: JMP Securities downgrades Strong Buy to Mkt Outperform. Firm believes that entering the 4Q05 earnings season, the housing market is weakening further. Given the more uncertain environment of the last few months, they are not expecting builders to raise guidance for 2006.
10:25 am DCP Midstream: KeyBanc Capital Mkts / McDonald initiates Buy. Target $30. Firm notes that the partnership is sponsored by DUK, (a 50/50 joint venture between DUK and COP) and is primarily engaged in the gathering, processing and transportation of natural gas. They est 2006 earnings at approx $1.01/unit and forecast a forward distribution rate in excess of $1.50/unit. Their price tgt and forward distribution assumption imply a yield to investors of approximately 5.50%.
10:24 am Google: Stanford Research upgrades Hold to Buy. Firm is noting that after last Friday's sell-off GOOG now trades in-line with YHOO. Firm believes that given GOOG's superior growth and sustained operational improvements, it should trade at a premium.
10:23 am Isle of Capri: Brean Murray reiterates Sell . Target $23 to $23. Firm believes the co's announced $85 mln upgrade in Kansas City lacks a visible return and underscores their view that many of its properties suffer to a greater extent than other operators when a market becomes more competitive, resulting in greater capital spending and lower returns than other operators we follow. They continue to recommend that investors own PENN or ASCA rather than ISLE.
10:04 am AC Moore: Dougherty & Company upgrades Neutral to Buy. Upgrade follows co's updated guidance, as they believe the perceived earnings potential at the co will provide support to the stock near current levels.
10:03 am Pacific Energy: Credit Suisse initiates Outperform. Target $36. The firm says that the co leveraged to the attractive crude oil mkt in California, offering both pipeline and storage capacity. The firm also says that the co offers a strong presence in the Rocky Mountains, with the ability to move crude from Canada through all the major refineries in the region.
10:00 am Exelon: Prudential reiterates Neutral. Target $54 to $54. Firm believes that with favorable recommendations from F.E.R.C., I.C.C. Staff and A.L.J., approval of the procurement auction appears likely. They say interveners appear desperate by requesting the I.C.C. to postpone its decision and FERC to reconsider its auction endorsement. |
