From Briefing.com: 5:02PM Xilinx delays earnings release to July 25 (XLNX) 21.55 +0.20 : Co announces it is postponing its Q1 (Jun) earnings release to July 25. The independent investigation into Xilinx's option granting practices is not yet complete. In addition, Xilinx's independent auditors are reviewing available results and making an assessment of the company's practices.
4:53PM Market Internals (MKTIN) : The Dow increased 0.48% closing at 10799, the Nasdaq was up 0.27% to finish at 2043, and the S&P was up 0.19% to finish at 1237. Leading sectors included: metals and glass +2.5%, motorcycle manu +2.3%, fertilizer and agriculture +2.0%, steel +1.8%, soft drinks +1.7%. Lagging sectors included: electronic manu srvc -3.8%, general merchandise stores --3.7%, computer and electronics -3.4%, trading companies and distributors -3.2%, department stores -2.9%. Today's movement came from higher volume (NYSE 1723, vs. closing avg of 1708; Nasdaq 2041, vs. 2018), with higher advance/decline ratios (NYSE 1761/1503; Nasdaq 1581/1413, and with new lows outpacing new highs (NYSE 29/200, Nasdaq 28/251).
4:41PM Yahoo! reports EPS in line, revs slightly light, guides Q3 in line, reaffirms FY06 guidance (YHOO) 32.24 +0.40 : Reports Q2 (Jun) GAAP earnings of $0.11 per share, in line with the Reuters Estimates consensus of $0.11; revenues fell 28.7% year/year to $1.12 bln vs the $1.14 bln consensus. YHOO OIBDA $457 mln vs $415-455 mln co guidance, $450 mln Reuters consensus. Co issues in-line guidance for Q3, sees revs of $1.11-1.22 bln vs. $1.19 bln consensus. Co issues in-line guidance for FY06, reaffirms revs of $4.60-4.85 bln vs. $4.78 bln consensus. Co sees Q3 OIBDA of $445-505 mln vs $495 mln Reuters consensus; sees FY06 OIBDA $1.91-2.0 bln vs $1.985 bln Reuters consensus.
4:20 pm : Stocks were volatile Tuesday as the return of inflation fears, volatile oil prices, mixed earnings news and ongoing unrest in the Middle East had investors scrambling to decide whether or not oversold conditions warranted owning stocks ahead of important CPI data and two-day tstimony on the economy from Fed Chairman Bernanke. When it was all said and done, oil prices selling off sharply in the final hour of trade and a late-day analyst upgrade on Intel Corp (INTC 18.21 +0.37) acted as sources of reassurance that things were not as bad as initially thought.
Crude for August delivery rebounding as much as 1.7% to $76.55 per barrel intraday, amid escalating tensions between Israel and Hezbollah, exacerbated early concerns about the impact higher energy prices were having on the economy. To wit, the Labor Dept. reported that total PPI rose a stronger than anticipated 0.5% in June, fueled by a 0.7% rise in energy prices. Even after backing out volatile energy costs, the more closely watched core rate rose 0.2% (consensus 0.2%), leaving the core rate up 1.9% year/year -- the highest since September. The 10-year note tumbled 16 ticks, lifting the yield to 5.13%. Be that as it may, since the PPI data are much more volatile than tomorrow's more influential CPI data, an in-line read on core PPI provided some indication that inflation is not increasing significantly and may actually be holding steady.
Also keeping investor enthusiasm in check throughout most of the session was a warning from Target Corp. (TGT 45.51 -2.04), which hit a 52-week low after slashing its July same-store sales outlook, adding to the market's concerns about there being a slowdown in discretionary spending due to rising energy prices. However, after oil eventually closed at a three-week low below $74 per barrel, matching Monday's 2.3% reversal as traders became convinced the conflict will not spread deeper into the oil-rich Middle East, overall sentiment improved to leave Consumer Discretionary as the only sector to post a loss.
Among the more influential sectors eking out modest gains into the close were Financials, as the brokerage group got a boost after TD Ameritrade (AMTD 14.69 +1.05) reported it achieved a record quarter. Aside from the turnaround in Intel late in the day, Technology also got a boost from Network Appliance (NTAP 28.13 +1.04), whose reaffirmed Q1 EPS outlook lent some assurance about tech's growth prospects and eventually overshadowed Sanmina-SCI's (SANM 3.78 -0.49) Q3 warning. Industrials was another important sector offering some notable leadership after United Technologies (UTX 58.88 +0.92) beat analysts' expectations and raised its full-year profit outlook. BTK -0.2% DJ30 +51.87 DJTA +0.7% DJUA +0.3% DOT +0.8% NASDAQ +5.51 NQ100 +0.3% R2K +0.6% SOX -0.4% SP400 +0.03% SP500 +2.37 XOI +0.6% NASDAQ Dec/Adv/Vol 1438/1553/2.02 bln NYSE Dec/Adv/Vol 1501/1763/1.65 bln
4:11PM IBM beats by a penny (IBM) 74.26 +0.56 : Reports Q2 (Jun) earnings of $1.30 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $1.29; revenues fell 1.7% year/year to $21.89 bln vs the $21.93 bln consensus.
3:29PM Bond Watch: Treasuries Sink on Data, Prepare for Bernanke (BONDX) : The market got hammered as inflation data came in hotter than expected even as geopolitical issues seemed to reach a tipping point. The market is all about Bernenake & how he will frame the rate situation, he needs to leave all his options open, while still calling inflation the scourge it is. The questioning will touch on energy costs as well as the housing market, both topics that will garner headlines & probably weigh on prices. The curve remained on the inverted track, with the 2-10-yr yield spread hanging near -5.2, near the most inverted levels on the month. Players are looking to tomorrow's Federal Reserve testimony as an indicator, of sorts, with the chairman's words being carefully chosen, but he will be walking a very fine line & the market is likely to miss-interpret any hesitation or misleading questions. The trade will be kicking off on the CPI report which, even if it is well higher than expected, will not figure into the Fed- Chief's prepared text. Or as one long time dealer noted "he will likely revert to Fed-speak..." essentially saying that if anyone understands what he is saying, then he miss-spoke. PPI was all jacked up in June while the core number reported inline. Net foreign purchases recovered from Apr's disappointing though upwardly revised $51.1B to $69.6B in May. The buck is better with the euro down at 1.2511 & the yen weaker at 117.3500. Spot gold sunk to 628.34 (-14.78) while Aug's crude oil went way lower toward the close to 73.54 (-1.76) & the Sep slipping to 75.60 (-1.31). Tomorrow brings CPI & housing data along with the much anticipated appearance of Fed chief Bernanke before the Senate banking committee. The 10-yr is currently -16/32nds yielding 5.128% (for more bond commentary click here).
2:04PM Market View: Semi -SMH- helps pace the way lower, tests 18 month low from April 2005 at 29.88 and stabilizes (TECHX) 30.02 -0.55 : Noted the test of last wk's low at 30.43 in the 10:20 update and highlighted the April/Jan 2005 lows at 29.88/29.67. Has tested the top of this support zone and is currently attempting to bounce.
2:50 pm TD Ameritrade (AMTD)
14.83 +1.19: Shares of TD Ameritrade are making a substantive move to the upside today in the wake of the company's fiscal third quarter earnings report. The reason is clear as the company's press release was littered with indications of record results across a broad array of metrics that included net income, non-GAAP EPS, pre-tax income, operating margin, EBITDA, and net revenues. Moreover, the company confirmed its guidance for the fourth quarter and increased its earnings projection for FY07.
Specifically, TD Ameritrade posted net income of $139.8 million, or $0.23 per diluted share, versus $83.6 million, or $0.20 per diluted share, in the year-ago period on a 130% increase in net revenue to $540.3 million. The company's acquisition of TD Waterhouse, which helped fuel a twofold increase in asset-based revenues, was the engine behind the robust growth that was augmented by increased interest rates, spreads and client cash balances.
For FY06 the company tightened its guidance to a range of $0.94-1.00 (consensus $0.92) and is forecasting earnings of $0.99-1.21 per share for FY07 (consensus $1.20). An earlier forecast placed the midpoint of the company's FY07 guidance at $1.06.
In looking at TD Ameritrade's chart, one would never have expected to hear such good things. At its closing price on Monday, AMTD was down 41% from the high it reached in early-March. The stock's fall from grace has been striking as it goes to show that, despite the company's best efforts to diversify its business, the market still looks at it largely as a trading business. That view is a bit misplaced given that commissions and transaction fees accounted for only 43% of net revenues through the nine-months ended June 30. Nonetheless, that's still a pretty good chunk, so it's understandable that the stock would still rise and fall with the broader market's behavior.
At the same time, heightened competition in the self-directed investor space is heating up with cuts to commission rates and peer companies like Charles Schwab (SCHW) and E*Trade (ET) all vying for many of the same customers. Mindful of this, the market had ample concerns about TD Ameritrade's ability to meet its earnings expectations and that weighed heavily on the stock. AMTD proved the naysayers wrong with its results today, and accordingly, made a strong case for itself that the recent sell-off was overdone. In light of the uncertain market environment, we wouldn't commit to an aggressive position in the stock just yet, but we would take advantage of the material markdown to open a minor position.
(Disclosure: Briefing.com has a business relationship with TD Ameritrade, Charles Schwab, and E*Trade)
--Patrick J. O'Hare, Briefing.com
11:31 am Coca-Cola (KO)
43.31 +0.61: Dating back to its fourth quarter report, we indicated that we liked Coca-Cola on a risk-reward basis. Since then, the total return for the stock, which includes dividends, has been 7.50% versus an 0.8% decline for the S&P 500. With its second quarter report this morning, our view on Coca-Cola remains unchanged.
To be sure, one isn't going to be blown away by Coke's numbers, but they do reflect steady improvement in its operations that, importantly, has been underpinned by growth in its carbonated beverage segment, which was up 3.0% in the June quarter. Noncarbonated beverages, meanwhile, enjoyed 5.0% unit case volume growth.
Altogether Coke delivered 4.0% unit case volume growth on a global basis in the second quarter that was driven by a 2.0% increase in North America, a 7.0% increase in Latin America, a 3.0% gain in the European Union, and a 10.0% jump in North Asia, Eurasia and Middle East. Its earnings of $0.74 per share, excluding a $0.04 per share net benefit related primarily to a gain from the sale of shares in the IPO of a Turkish bottler, were up 9.0% on a comparable basis from the year-ago period and were two cents ahead of the Reuters Estimates consensus estimate.
The company noted in its press release that it maintained volume share in carbonated soft drinks, sports and energy drinks, and packaged water, and that it gained share in juice and juice drinks. Not surprisingly, the company also indicated that it "remains excited about the remainder of the year."
At first glance, it appears the market is somewhat excited by Coke's performance as its stock is trading up in a down market.
Clearly, if you're a growth-oriented investor, Coca-Cola won't be your cup of tea as its growth these days is measured in terms of single-digit percentage gains. Be that as it may, Coca-Cola is an appealing defensive-oriented investment at its current price level given its low volatility, its long history of making, and raising, dividend payments, and its ability to generate healthy levels of free cash flow. Additionally, at 19.2x trailing twelve month earnings, it trades at roughly a 20% discount to its 5-year historical average.
--Patrick J. O'Hare, Briefing.com
11:12 am KeyCorp (KEY)
35.16 +0.08: KeyCorp's second quarter profit climbed 6%, driven by solid commercial loan growth and higher income from fee-based businesses. Specifically, net income totaled $308 million, or $0.75 per share, compared with $291 million, or $0.70 per share, in the year ago period. Revenue rose 7.4% year/year to $1.3 billion. According to Reuters Estimates, analysts had forecast earnings of $0.71 per share on revenue of $1.26 billion.
Net interest income for the period increased 4% to $752 million, helped by growth in commercial loan development. However, the narrowing gap between short and long-term interest rates, which underpins our tempered view on regional banks, and is a contributing factor to our Market Weight rating on the Financial sector, continues to squeeze lenders such as KeyCorp, with net interest margin down 2 basis points to 3.69%.
Meanwhile, total deposits increased 4.8% to $60.8 billion and total loans increased 4.2% to $64.7 billion. The company said net loan charge-offs and non-performing loans were down from the year ago period. KeyCorp's non-interest income, or income from fees and other products, totaled $547 million, up 12.6% from $486 million last year. The increase was attributed to higher principal investing, a gain related to MasterCard's initial public offering, as well as increases in income from trust and investment services and investment banking.
Based on the latest results, the company said it expects to earn $0.70 to $0.74 per share in the fiscal third quarter, and $2.85 to $2.95 per share for the full year. Analysts on average are looking for earnings per share of $0.72 and $2.86, respectively.
--Richard Jahnke, Briefing.com
10:43 am Johnson & Johnson (JNJ)
60.90: Taking a contrarian view, we argued back in April on behalf of JNJ, bloodied from its losing battle over Guidant with Boston Scientific (BSX). We felt the shares already reflected a downtrodden view of the 120-year-old health care products company, with shares trading at historic lows on a price to earnings multiple dating back over ten years. JNJ's second quarter performance, while far from ideal, is a step in the right direction in amending the market's diminished view. Profits rose 9% in the quarter to $2.82 bln or 95 cents per share on higher sales of medical devices. Excluding non-recurring items, per share profits of 98 cents bested expectations by a penny.
Sales within its Medical Device segment grew 6.2% to $5.15 bln driven by Cyper heart stents and DePuy artificial knees. The unit accounted for 38% of total revenues, which rose 4.7% to $13.4 bln. Worldwide Pharmaceutical sales increased 3.2% to $5.8 bln. JNJ cited strong performance in top selling Risperdal antipsychotic medication, Remicade for inflammatory diseases, hyperactivity disorder drug Concerta, and its Topamax drug for epilepsy and migraine prevention. The downside was an 80 basis point contraction in gross margins lowering operating profits. Margins, coupled with a lower than expected tax rate, weakened JNJ's overall operational performance in the quarter.
In June, JNJ announced plans to buy Pfizer's (PFE) consumer healthcare business, which makes Listerine, Visine and Benadryl, for $16.6 bln in cash. While pricey at 4x revenues, it's considerably less risky than the Guidant acquisition would have been, plus it helps diversify JNJ's business. This quarter, helped by strong sales of its skin care lines, Splenda sweeteners, baby and child care items, sales within the Consumer unit rose 5.3% to $2.4 bln. JNJ's large cap status and defensive qualities, including 2.4% dividend yield, underscore our long-term positive view on the stock given the current market conditions. Shares trade at 17.2x trailing and 16.5x estimated earnings.
--Kimberly DuBord, Briefing.com
10:27 am Wells Fargo & Co. (WFC)
67.98 -0.57: Shares in fifth-largest bank Wells Fargo & Co. slipped Tuesday after the company said its earnings missed consensus by a penny after it sold off some adjustable rate mortgages and debt securities at a loss in the latest period.
The company, which has a market cap of about $114.21 billion, said it saw second-quarter earnings of $1.23 per share, $0.01 worse than a Reuters Estimates consensus of $1.24 after it sold some ARMs and debt securities at a $250 million loss, compared with "negligible gains" on the sale of debt securities in the second quarter of 2005. The company said revenues in the latest period rose 11.7% year over year to $8.79 billion versus consensus of $8.76 billion.
Wells Fargo, which is the leading lender in the home purchase market, moved to shore up investor confidence in June when it said it would split its stock 2-for-1 and increase its quarterly cash dividend to $0.56 from $0.52. Both the cash dividend and stock dividend will be payable to stockholders of record at the close of business on Aug. 4. Wells Fargo's board of directors also authorized the repurchase of up to an additional 25 million shares of the company's common stock, although no date was set for that action.
While the San Francisco-based bank may have been gearing up for the slip in earnings due to mortgage-related activity, its positive actions seem to outweigh the rather muted negative impact on its financials. The company's solid history with its financial reports and the fact that it continues to trade near the industry average at 14.6x trailing 12-month earnings continue to make this stock an attractive buy.
--Christine Marie Nielsen, Briefing.com
10:15 am New York Times Co. (NYT)
22.84 -0.34: The New York Times Co. on Tuesday said second quarter earnings rose from a year ago, as higher advertising and circulation revenue helped offset an increase in newsprint and other expenses. For the latest quarter, The New York Times, which also owns The Boston Globe and the International Herald Tribune, earned $61.3 million, or $0.42 per share, up from $60.8 million, or $0.42 per share, a year earlier. Excluding costs associated with a staff reduction program announced in September 2005, earnings were $0.46 per share, a penny better than the Reuters Estimates consensus.
Total revenues for the quarter rose 1.6% to $858.7 million, slightly below the consensus estimate of $862.4 million. Advertising revenues increased 1.0%, while circulation revenues were up 0.6% and other revenues increased 12.6%. By segment, News Media revenues edged up 0.5% to $800.2 million, helped by higher online advertising revenues, and Broadcast Media revenues rose 5.2% to $39.1 million. The company's Internet businesses, including About.com, saw revenues increase 35% to $66.1 million, or approximately 7.7% of total revenue, versus 5.8% last year.
Higher revenues, however, were offset by increasing expenses. Total costs and expenses grew 2.9% to $759.7 million, including a 7.4% rise in newsprint expense, mainly from higher prices partially offset by lower consumption, the company said.
In separate statement, The New York Times said it plans to reduce the size of its newspaper and close a printing plant, a move that would generate annual savings of $42 million and result in 250 jobs being cut. With rising costs for newsprint and other raw materials weighing on the industry, as well as a shift in advertising spending toward the Internet, the outlook for The New York Times and other publishers remains clouded. As such, we would continue to be on the sidelines with the stock, as noted in our Mid Cap column in February.
--Richard Jahnke, Briefing.com
09:55 am BlackRock Inc. (BLK)
135.08: Major money manager BlackRock, Inc. Tuesday released financials that could have looked a little more solid. While the Boston-based company reported second-quarter earnings of $1.19 per share, excluding non-recurring items that were $0.02 better than a Reuters Estimates consensus of $1.17, it also issued downside guidance for the full year of 2007.
BlackRock Chairman and Chief Executive Laurence Fink said in a press release that the company's second-quarter financial results were driven by asset growth in prior periods, a favorable shift in the company's asset mix and strong investment performance. The company said revenues rose 32.9% year over year to $360.7 million versus consensus of $335.8 million in the latest period.
The company, which has a market cap of about $8.66 billion, said it sees earnings per share of $6.65 to $6.95 versus $7.10 consensus for the full year of 2007. The stock market's drop since May has brought the rallying shares of many asset managers down a notch in recent days.
BlackRock, which had approximately $464.1 billion of assets under management as of June 30, has been in the news as of late because it is set to close its acquisition of Merrill Lynch's asset management business later this year. BlackRock said significant changes in operating results are expected from the combination of BlackRock and Merrill Lynch Investment Managers (MLIM).
The arrangement allows Merrill to outsource its fund management business, which was restricted by industry regulations from recommending in-house funds, and Merrill is no doubt eyeing activity over at the investment management company. BlackRock has grown its assets at four times the rate Merrill has over the last year. The deal is expected to be closed in the third quarter of this year.
Growth opportunities and operating leverage that result from the deal with Merrill will likely continue to support the shares into the long run; although with the shares currently at 35x trailing 12-month earnings - about twice the industry average - investors should wait for dips to buy the stock.
--Christine Marie Nielsen, Briefing.com
09:33 am Freeport-McMoRan
51.57: Thankfully for Freeport-McMoRan, soaring copper and gold prices have offset continued production shortfalls at its Grasberg mine in Indonesia. Despite a 30% drop in copper and a 55% decline in gold production over the prior period, second quarter profits doubled on higher prices. In June, Freeport informed investors that a high clay content at the Grasberg mine would reduce copper output to 236 mln pounds, less than the 280 mln predicted. Its January forecasts have been reduced to 1.2 mln pounds of copper from 1.3 mln and 1.7 mln ounces of gold.
Freeport's second quarter net income was $367 mln, or $1.74 per share. Excluding a four cent non-recurring gain, per share profits exceeded expectations by 32 cents. Sales out of its PT Freeport Indonesia (PT-FI) Indonesian mining unit totaled 220.1 mln pounds of copper and 278.0 thousand ounces of gold. Copper prices more than doubled in the quarter to an average of $3.33 per pound, compared to the LME spot price of $3.56 as of July 17th. Realized gold price climbed 43% to an average of $613.77 per troy ounce vs. spot price of $652.50 on the London Metal Exchange.
Cash flows continue to swell, enabling the company to shore up its balance sheet and return value to back to its shareholders. Capital expenditures totaled approximately $58 mln in the quarter, targeting $250 mln for the year. Freeport deployed cash to shareholders through dividends and share buybacks totaling $199 mln and $100 mln, respectively, in the quarter.
Favorable market conditions for base metals continue to generate strong earnings and cash flow due to high prices for producers. Second quarter results will likely be a wake up call for the market given the likely magnitude of the financial performances by the group. FCX certainly demonstrates this feat in the face of production shortfalls. The group's financial performance and news that China's economy grew 11.3% in Q2 - the most in a decade - are once again lifting copper prices. Strong fundamentals, global consolidation, easing cost pressures, and attractive shareholder value underscore our enduring positive view of the base metals.
--Kimberly DuBord, Briefing.com
09:28 am Target (TGT)
47.55: Going into the month of July Target was expecting to achieve a same-store sales increase in the neighborhood of 4-6%. In a sales update last evening, Target said it is now expecting to deliver an increase in the range of only 3-4%.
To Target's credit, the revision still translates to a decent pace of growth, but nonetheless, the direction of the revision will feed the market's concerns about there being a slowdown in discretionary spending due to the effects of rising energy prices and interest rates. Moreover, it will feed concerns that the changes in the macro-economic environment are starting to have an effect higher up the income food chain since Target, unlike Wal-Mart (WMT), isn't as beholden to the spending habits of lower-income consumers.
The disappointment from Target, though, may be a case more of management having raised the expectations bar a bit too high to begin with given all that is going on outside the red-lined interior of Target's stores. After all, the same-store sales forecast for this July was the same as for July 2005 when average gas prices were approximately $0.70 a gallon cheaper and the fed funds rate was 200 basis points lower.
All things considered, Target's same-store sales are still expected to jump at a pretty good clip against a tough comparison in the year-ago period when same-store sales rose 5.5%. For now, that will mean little as the market is taking a glass-is-half empty approach these days as it relates to consumer spending. Target's update is making that glass look a little emptier today and it plays into the Underweight rating Briefing.com currently has on the Consumer Discretionary sector.
Shares of TGT are indicated 3.0% lower in pre-market trading.
--Patrick J. O'Hare, Briefing.com
09:07 am National City Corp. (NCC)
34.94: National City Corp. said its net income for the second quarter fell 24% from a year ago, when results were boosted by large mortgage servicing gains, but it still topped Wall Street's expectations. Specifically, the Cleveland-based bank, which recently agreed to acquire Harbor Florida Bancshares (HARB), reported earnings of $473 million, or $0.77 per share, down from $625 million, or $0.97 per share last year. Excluding hedging results, however, National City said earnings were up sharply, driven by strong performance in its retail, small business, and corporate banking units. Analysts on average were looking for earnings of $0.74 per share, according to Reuters Estimates.
Net interest income for the quarter totaled $1.2 billion, about equal with the prior year period. National City said growth in average earnings assets was offset by a decline in net interest margin, reflecting tighter lending spreads. Net interest margin was 3.73%, compared with 3.76% last year. Meanwhile, average portfolio loans slipped 3% to $102 billion, as strong growth in commercial loans was offset by the implementation of an "originate and sell" strategy for non-conforming mortgage loans and home equity lines and loans in 2006.
Despite National City's better than expected results, our enthusiasm for regional banks remains tempered as the narrowing gap between short and long-term interest rates continues to weigh on lenders. However, as highlighted in our Market Weight view on the Financial sector, we continue to favor more diversified banks that have greater differentiation in their service capabilities, such as investment banking.
--Richard Jahnke, Briefing.com
08:55 am United Technologies (UTX)
57.96: Shares in industrial conglomerate United Technologies Corp. were expected to open a smidgen higher Tuesday after the company reported second-quarter earnings of $1.02 per share, excluding non-recurring items. That was $0.01 better than the Reuters Estimates consensus of $1.01 as the company said demand for aerospace products offset weakness at its Carrier heating unit. The company also raised its guidance for the full year.
United, which has a market cap of about $58.59 billion, said its revenues rose 10.0% year over year to $12.26 billion versus the consensus of $11.85 billion. On the back of the strong quarterly results, which support our Overweight rating on the Industrials sector, United Technologies raised its full-year earnings outlook. The company said it sees earnings per share for the full year of $3.55 to $3.65 from $3.50 to $3.60 versus $3.62 consensus. The company said it sees full-year revenues of $46 billion to $47 billion versus $46.15 billion consensus.
United Tech makes Sikorsky helicopters, Pratt & Whitney plane engines, aviation components at its Hamilton Sundstrand unit, Strykerarmored vehicles, Abrams tanks and munitions, and Otis elevators.
Given the company's positive outlook for the current year, investors should continue to look for solid performance as business conditions remain favorable. And at 18.4x trailing 12-month earnings, the company is currently trading at a discount to many of its competitors.
--Christine Marie Nielsen, Briefing.com
08:28 am Merrill Lynch (MER)
68.27: Merrill Lynch, the world's largest brokerage, posted record quarterly revenues and profit growth of 44% in the second quarter as investment banking and trading offset stock market declines. The market has grown accustomed to upside reports by the Investment Banks and Brokers, and despite record profits, shares have fallen on concerns over the sustainability of trading profits. Despite a crestfallen equity market, Merrill's trading revenues rose 37% on strong client activity levels and narrow credit spreads, but the figure still trailed the 150% gain for Goldman Sachs (GS) and a 45 % upside reported Monday by Citigroup (C).
Interest rate uncertainty will continue to weigh on the markets and the brokers despite robust activity levels. The standout remains the fevered pace of global M&A activity. Merrill's investment-banking revenues advanced 21% in the quarter driven by arranging mergers and acquisitions and stock underwriting. Revenue within its global markets and investment banking unit, which includes institutional sales and trading, grew 33% to $4.58 bln. Retail brokerage climbed 19% to $3.05 bln.
Net earnings came in at $1.6 bln and $1.63 per share, besting analysts' expectations by a dime. Still, profits lagged behind its competitors, who reported earnings last month. Total net revenues minus interest expenses rose 29% yearly and 2% sequentially to $8.2 bln. At this point, market sentiment will continue to dictate price action within the group as concerns over near-term slowing in trading profits linger.
--Kimberly DuBord, Briefing.com
09:41 am Pinnacle: KeyBanc Capital Mkts / McDonald initiates Hold. Firm initiates saying that they belive management is beginning to exploit significant synergies existing across the various operating divisions that could generate new market opportunities by leveraging in-house capabilities to provide complete solutions for customers' needs. Firm believes co's strong cash flow characteristics and an unlevered balance sheet set the stage for future external growth opportunities. Firm views the shares as undervalued at current levels and recommend investors accumulate positions.
09:39 am Loopnet: Credit Suisse initiates Neutral. Target $18. Firm initiates saying they believe Loopnet is best viewed as a long term beneficiary of the shift in advertising and classified dollars online. The co ests the total market for real estate advertising is roughly $12 bln annually, and says over the next 3- 5 years $3 bln of this will shift online, with commercial accounting for $1 bln.
09:38 am Verizon: Prudential initiates Underweight . Target $31. Firm initiates with an Underweight and $31 tgt, based on risk regarding FiOS and FTTP rollout, less likelihood of further upside wireless surprise, uncertainty regarding post-MCI execution, risk of potentially overpaying for Vodafone, competitive telco issues and valuation.
09:29 am DIRECTV: Prudential reiterates Underweight . Target $18 to $16. Firm cuts price tgt saying that their conference call with Scott Latham, Executive Director at Cushman and Wakefield, reinforced firm's view of the positive Manhattan office leasing and sales data points that indicate a uniquely favorable supply/demand environment. With Midtown office vacancy at just 5.4%, firm says buyers are underwriting 25% market rent growth over the next three years, ahead of market forecasts of 14%.
09:27 am SL Green Rlty: Banc of America Sec reiterates Buy. Target $110 to $118. Firm raises price tgt saying that their conference call with Scott Latham, Executive Director at Cushman and Wakefield, reinforced firm's view of the positive Manhattan office leasing and sales data points that indicate a uniquely favorable supply/demand environment. With Midtown office vacancy at just 5.4%, firm says buyers are underwriting 25% market rent growth over the next three years, ahead of market forecasts of 14%.
09:27 am Alltel: Banc of America Sec reiterates Buy. Target $70 to $58. Firm cuts price tgt saying that while valuation is middling in absolute terms, growth is attractive vs. the sector. Firm expects management to begin executing on a $3 bln buyback program but with a post-spin leverage estimated at 0.1x 06E net debt to EBITDA, they believe substantial upside to equity returns exists representing incremental potential upside for the shares.
09:26 am Power Integrations: Ferris Baker Watts upgrades Neutral to Buy. Target $21. Firm ups rating saying they believe $15 is an attractive entry point for the stock. The firm says the business is fundamentally sound and the addition of Rafael Torres, formerly of PLX Technology, is a step toward addressing corporate governance concerns. They believe the clean financials are now in the hands of auditors and they do not believe Power Integrations would have been able to attract Mr. Torres without significantly mitigating the delisting risk. The firm also thinks it is likely that much of the stock supply related to delisting concerns has already changed hands.
09:24 am aQuantive: RBC Capital Mkts upgrades Sector Perform to Outperform. Target $25 to $27. Firm upgrades saying their checks indicate that AQNT is on track to post upside over the next few quarters. The firm says the Atlas division has easily achieved internal rev goals established for 2Q06, and appears on track for 2H06.
09:20 am Rambus: WR Hambrecht downgrades Buy to Hold. Firm downgrades after yesterday judge in the Hynix trial cut the damage award to Rambus from $306 mln to $133 mln. Firm finds this ruling negative, very surprising and thinks the ruling yesterday opens the door for a longer appeals process -- thus reducing visibility... Stock trading at $20.12 in pre-mkt. |
