From Briefing.com: Weekly Recap - Week ending 20-Jul-12Dow -120.79 at 12822.57, Nasdaq -40.60 at 2925.3, S&P -13.85 at 1362.66
Stocks saw a persistent bid over the first four days of this week, helped by low expectations for earnings results and continued hope that the Fed will eventually step in with additional quantitative easing. The low expectations into earnings helped several major index components move higher on what might normally be considered to be lackluster earnings reports, characterized by slight earnings beats and revenue misses. The continued Fed hopes allowed broader markets to shake off disappointing economic data. While stocks gained over the first four sessions of the week, sentiment turned negative on Friday as European concerns weighed on stocks, paring the week’s gain down to just 0.5%.
Stocks opened lower on Friday and showed weakness over the course of the day, as renewed worried about Spain knocked Spain's equity market down 5.8% and weighed heavily on other European markets. Spain's 10-year yield climbed back above the 7.0% level to end the week at 7.2%. Egan Jones downgraded Spain's sovereign debt rating to CC+ from CCC+ following word the Spanish region of Valencia needs government help to meet its debt obligations. The EU also recently released a Memorandum of Understanding on the bailout of the Spanish banking sector which calls for a EUR30 billion tranche to be released shortly, ahead of a stress test of the system which will be completed by the end of September. A Spanish roadmap will be created by the end of November.
Looking at U.S. equity movers, Chipotle Mexican Grill (CMG 316.98, -86.88) saw its largest ever percentage loss for one session after disappointing the Street on the top line, and warning about costs in the back half of the year. Other momentum restaurant stocks such as Panera Bread (PNRA 144.97, -5.72) and Starbucks (SBUX 51.96, -2.24) also showed relative weakness.
Looking at the technology sector, flash memory producer SanDisk (SNDK 38.70, +3.62) was a notable outperformer after the company beat second quarter estimates and gave a bullish outlook for the remainder of the year. On the other hand, chip maker Advanced Micro Devices (AMD 4.22 -0.64) missed reduced expectations and guided third quarter revenue below expectations.
Google (GOOG 610.82, +17.76) was one of the lone bright spots this morning as the stock trades up close to 3.0% after announcing earnings of $10.12 per share which beat the Capital IQ Consensus Estimate of $10.09 per share. The company also announced revenues surged 39% year over year to $9.61 billion which was well above the consensus estimate of $8.41 billion. Key metric paid clicks rose 1% quarter over quarter and 42% year over year.
Treasuries saw heavy buying dropping yields across the curve to near record lows. Today’s session brought about a record low print in the 5-yr yield as it hit 0.576%. Meanwhile, the benchmark 10-yr yield holds just above its record low 1.440%. Significant flattening of the yield curve has the 2-10-yr spread tighter at 124.5 basis points... Today was also the July options expiration.
Recapping the first four days of the week, we'd note that Monday started with weakness in China following comments from Chinese Premier Wen Jiabao, which suggested China's economic recovery may take some time. Elsewhere, reports out of Europe indicated that the ECB was looking to impose losses on bondholders of Spanish banks which are most impacted by the crisis. Earnings season continued as Citigroup (C 25.93, -0.65) finished slightly higher following its mixed quarterly results. The S&P was nearly flat on the day.
On Tuesday, the flow of earnings continued as market participants awaited the highly anticipated testimony by Ben Bernanke. Goldman Sachs (GS 94.16, -0.84) beat top and bottom line estimates, but only finished marginally higher on the day. Mosaic (MOS 57.50, -0.12) finished higher by over 4% following better than expected results. On the other hand, Johnson & Johnson (JNJ 68.63, -0.90) missed revenue expectations and lowered FY12 guidance. As far as the Bernanke testimony, one key item that stuck out was the mention of possible deflation, which may have been interpreted as one potential justification for more quantitative easing. Shortly following this mention, markets seemed to catch a bid, and the S&P finished 1.6% higher on the day.
On Wednesday, The Fed's Beige Book was released and suggested "overall economic activity continued to expand at a modest to moderate pace in June and early July." Excerpts from the Beige Book hinted that reports on residential housing were "largely positive" and drought caused "stress to crops and livestock" while indicating employment grew at a "tepid pace." The S&P managed a 0.6% again for the session.
On Thursday, earnings season stepped into high gear. Morgan Stanley (MS 12.78, -0.47) shares fell 5% after the bank reported disappointing earnings and revenues. MS reported Q2 earnings of $0.28 per share including its Debt Valuation Adjustment, or DVA, and $0.16 excluding DVA. The Capital IQ consensus called for EPS of $0.33. Revenues were also below expectations. International Business Machines (IBM 192.45, -2.69) was a notable winner, rallying 3.8% and regaining its 200-day moving average as the stock was able to shake off a top line miss. The S&P inched out a gain of 0.3%.
Looking to next week, approximately 750 companies that we cover are expected to report second quarter results, including 175 companies in the S&P 500. Apple (AAPL 604.30, -10.02) will announce its results on Tuesday afternoon, and Facebook (FB 28.76, -0.24) will report its first quarter as a public company following Thursday's closing bell. On Monday morning, McDonald's Corp. (MCD 91.58, -1.18), Halliburton (HAL 30.77, +0.56), and Eaton Corp. (ETN 39.06, -0.47) will report their results.
| Index | Started Week | Ended Week | Change | % Change | YTD % | | DJIA | 12777.09 | 12822.57 | 45.48 | 0.4 | 5.0 | | Nasdaq | 2908.47 | 2925.30 | 16.83 | 0.6 | 12.3 | | S&P 500 | 1356.78 | 1362.66 | 5.88 | 0.4 | 8.4 | | Russell 2000 | 800.99 | 791.54 | -9.45 | -1.2 | 6.8 |
8:00AM Ramtron receives extended offer by Cypress Semiconductor (CY) to be acquired ( RMTR) 2.75 : Cypress Semiconductor (CY) announced that it has extended its tender offer to acquire all of the outstanding stock of RMTR for $2.68 per share in cash to 5:00 p.m., New York City time, on August 3, 2012. The offer was previously scheduled to expire at 12:00 midnight, New York City time, on July 19, 2012. CY's offer represents a 48% premium over Ramtron's closing price of $1.81 per share on June 11, 2012, the day before CY publicly disclosed its offer for Ramtron. The all-cash offer is not conditioned on due diligence or financing. In addition, CY announced that the waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to its acquisition of Ramtron has expired and that CY has received the necessary regulatory clearance pursuant to the German merger control laws. CY does not believe that any other regulatory approvals are necessary in connection with the acquisition.
7:45AM General Electric will reorganize its Energy business into three standalone businesses effective in 4Q12 ( GE) 19.80 : Co will reorganize its Energy business into three standalone businesses effective in 4Q12. The Energy headquarters organizational layer will be phased out by the end of 2012. This change will speed decision making, reduce layers and decrease cost. The three new businesses will report directly to GE Chairman and CEO Jeff Immelt: GE Power and Water: It provides full lifecycle solutions for power generation customers, including renewable energy and water processing technologies. It will have ~41,000 employees and planned rev of ~$28 billion in 2012. GE Oil and Gas: It provides equipment and services for all segments of the offshore and onshore oil and gas industry, including turbomachinery and drilling and surface, subsea, and pipeline equipment and services. It will have ~33,000 employees and planned rev of ~$15 billion in 2012. GE Energy Mgmt: It consists of technology solutions for the delivery, mgmt, conversion, and optimization of electrical power for customers across multiple energy-intensive industries. It will have ~27,000 employees and will have planned rev of ~$7 billion in 2012. GE will begin reporting separate segment financial results for these three businesses beginning with the fourth quarter of 2012.
6:37AM General Electric beats by $0.01, reports revs in-line; on track to deliver double digit earnings growth in FY12 ( GE) 19.80 : Reports Q2 (Jun) earnings of $0.38 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.37; revenues rose 2.5% year/year to $36.5 bln vs the $36.8 bln consensus. Co is on track to deliver double digit earnings growth in FY12 (consensus +12%). Revenues were negatively impacted by $0.9 bln due to FX and further shrinkage of GE Capital business. GE Capital revenues of $11.5 bln decreased 8% from last year, driven by lower assets in-line with plan. GE's Q2 Industrial segment revenues were $25.0 bln, up 9%. Industrial segment organic revenues were up 10% for the quarter. Industrial growth market revenues were up 17%, driven by double-digit growth in Australia, Canada, China, Latin America, the Middle East/North Africa, Southeast Asia and Russia. Industrial segment profit was up 7% to $3.7 bln and segment operating profits were strong in Energy Infrastructure and Transportation, up 13% and 58%, respectively. In addition, pricing on orders was up 1.2% in total with higher prices in 4 out of 5 businesses. Energy Infrastructure pricing was up 1.8%. Cash generated from operating activities was up 55% at $6.8 bln. GE ended the quarter with $74 bln of consolidated cash and cash equivalents. Infrastructure orders were $23.1 bln, down 1% primarily driven by a 37% decrease in orders for wind turbines. Orders were up 8% on a year-to-date basis. Total orders performance included: Aviation up 5% and Transportation up 2%.
"GE Capital's strong operating performance and capital position allowed it to return a $3 bln dividend to the parent, and our Industrial segments delivered another quarter of double-digit organic revenue growth. Our strategy to invest in growth markets is paying off, as we achieved orders expansion in growth markets of 14% and revenue growth of 17%. We ended the quarter with a record backlog... Our Industrial outlook remains positive. Margins have stabilized and Energy, Oil & Gas, and Transportation performed very well with double-digit profit increases. We are confident in our double-digit EPS growth expectations for 2012 and are raising our operating cash expectations to $17-19 bln based upon the restart of the GE Capital dividend."
NCR Corp (NCR) reported second quarter earnings of $0.65 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus of $0.59, while revenues rose 10.8% year/year to $1.41 billion versus the $1.46 bln consensus. The company reaffirmed guidance for fiscal year 2012 with EPS of $2.40-2.47 versus the $2.49 consensus and fiscal year 2012 revenues to increase in the range of 11 to 13 percent on a constant currency basis compared with 2011. The company lowered GAAP EPS slightly.
Advanced Micro (AMD) reported second quarter earnings of $0.06 per share, excluding non-recurring items, $0.01 worse than the Capital IQ consensus of $0.07, while revenues fell 10.2% year/year to $1.41 bln vs the $1.41 bln consensus, where non-GAAP GM flat QoQ at 46%. The company issued downside guidance for the third quarter with revenues of -4 to +2% QoQ to approximately $1.35-1.42 billion versus the $1.5 billion consensus. "Overall weakness in the global economy, softer consumer spending and lower channel demand for our desktop processors in China and Europe made the closing weeks of the quarter challenging. We are taking definitive steps to improve our performance and correct the issues within our control as we expect headwinds will continue in the third quarter as the industry sets a new baseline. We remain optimistic about our core businesses as well as future opportunities with our competitively differentiated next-generation Accelerated Processor Units (APUs). Our recently launched Trinity APU continues to gain traction with customers."
Microsoft (MSFT) reported fourth quarter earnings of $0.73 per share, excluding non-recurring items, $0.11 better than the Capital IQ Consensus of $0.62, while GAAP revenues rose 4.0% year/year to $18.06 billion, non-GAAP rev +7% to $18.6 billion, consensus is $18.21 bln consensus. The Server & Tools business revenue grew 13% for the fourth quarter and 12% for the full year. The Microsoft Business Division revenue grew 7% for the fourth quarter and 7% for the full year reflecting continued momentum in Office 2010 sales. The Windows & Windows Live Division revenue declined 13% for the fourth quarter and 3% for the full year. Adjusting for the impact of the Windows Upgrade Offer, Windows Division non-GAAP revenue declined 1% for the fourth quarter and 1% for the full year. Windows 7 adoption continued with more than 50% of worldwide enterprise desktop now running Windows 7. The next version of Windows will release to manufacturing this August and will become generally available October 26, 2012. The Online Services Division revenue grew 8% for the fourth quarter and 10% for the full year reflecting growth in our search business. Bing organic U.S. search market share was 15.6% for the month of June 2012, up 120 points from the prior year period. The Entertainment and Devices Division revenue grew 20% for the fourth quarter and 8% for the full year primarily reflecting the addition of Skype. "Over the coming year, we'll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners."
Google (GOOG) reported second quarter earnings of $10.12 per share, $0.03 better than the Capital IQ consensus of $10.09, while revenues rose 39.0% year/year to $9.61 billion versus the $8.41 billion consensus. GOOG Q2 Costs per click +1% q/q; -16% y/y; Q1 results were -6% q/q, -12% y/y. GOOG Q2 Paid Clicks +1% q/q, +42% y/y; Q1 results +7% q/q, +39% y/y. Traffic acquisition costs, the portion of revenues shared with Google's partners, increased to $2.60 billion in the second quarter of 2012, compared to $2.11 billion in the second quarter of 2011. TAC as a percentage of advertising revenues was 25% in the second quarter of 2012, compared to 24% in the second quarter of 2011. Operating expenses, other than cost of revenues, were $4.0 billion in the second quarter of 2012, or 33% of revenues, compared to $2.97 billion in the second quarter of 2011, or 33% of revenues. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2012 through the second quarter of 2012, our Google revenues in the second quarter of 2012 would have been $68 million higher.
SanDisk (SNDK) reported second quarter earnings of $0.21 per share, $0.02 better than the Capital IQ consensus of $0.19, while revenues fell 24.9% year/year to $1.03 billion versus the $1.02 billion consensus.
09:21 am Sandisk shares soar over 10% following earnings
SanDisk (SNDK $39.05 +3.97) reported second quarter earnings of $0.21 per share, $0.02 better than the Capital IQ consensus of $0.19, while revenues fell 24.9% year/year to $1.03 billion versus the $1.02 billion consensus. 09:17 am Google shares rise 3% following beat on revenues
Google (GOOG $609.00 +15.94) reported second quarter earnings of $10.12 per share, $0.03 better than the Capital IQ consensus of $10.09, while revenues rose 39.0% year/year to $9.61 billion versus the $8.41 billion consensus. GOOG Q2 Costs per click +1% q/q; -16% y/y; Q1 results were -6% q/q, -12% y/y. GOOG Q2 Paid Clicks +1% q/q, +42% y/y; Q1 results +7% q/q, +39% y/y. Traffic acquisition costs, the portion of revenues shared with Google's partners, increased to $2.60 billion in the second quarter of 2012, compared to $2.11 billion in the second quarter of 2011. TAC as a percentage of advertising revenues was 25% in the second quarter of 2012, compared to 24% in the second quarter of 2011. Operating expenses, other than cost of revenues, were $4.0 billion in the second quarter of 2012, or 33% of revenues, compared to $2.97 billion in the second quarter of 2011, or 33% of revenues. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2012 through the second quarter of 2012, our Google revenues in the second quarter of 2012 would have been $68 million higher. 09:12 am Microsoft shares rise 1% following better than expected earnings
Microsoft (MSFT $31.03 +0.36) reported fourth quarter earnings of $0.73 per share, excluding non-recurring items, $0.11 better than the Capital IQ Consensus of $0.62, while GAAP revenues rose 4.0% year/year to $18.06 billion, non-GAAP rev +7% to $18.6 billion, consensus is $18.21 bln consensus. The Server & Tools business revenue grew 13% for the fourth quarter and 12% for the full year. The Microsoft Business Division revenue grew 7% for the fourth quarter and 7% for the full year reflecting continued momentum in Office 2010 sales. The Windows & Windows Live Division revenue declined 13% for the fourth quarter and 3% for the full year.
Adjusting for the impact of the Windows Upgrade Offer, Windows Division non-GAAP revenue declined 1% for the fourth quarter and 1% for the full year. Windows 7 adoption continued with more than 50% of worldwide enterprise desktops now running Windows 7. The next version of Windows will release to manufacturing this August and will become generally available October 26, 2012. The Online Services Division revenue grew 8% for the fourth quarter and 10% for the full year reflecting growth in our search business. Bing organic U.S. search market share was 15.6% for the month of June 2012, up 120 points from the prior year period. The Entertainment and Devices Division revenue grew 20% for the fourth quarter and 8% for the full year primarily reflecting the addition of Skype. "Over the coming year, we'll release the next versions of Windows, Office, Windows Server, Windows Phone, and many other products and services that will drive our business forward and provide unprecedented opportunity to our customers and partners." |
