Monthly Archives: May 2011
Upgrades and Downgrades This Morning
Upgrades
AXP – American Express resumed with Buy at Goldman
TSN – Tyson Foods upgraded to Buy from Hold at KeyBanc
APO – Apollo Global Management initiated with an Outperform at Keefe Bruyette
CS – Credit Suisse upgraded to Buy from Hold at Deutsche Bank
BEXP – Brigham Exploration upgraded to Outperform from Market Perform at BMO Capital
MMI – Motorola Mobility initiated with a Buy at ThinkEquity
BP – BP initiated with an Outperform at RBC Capital
AES – AES Corp upgraded to Buy from Hold at Citigroup
GILD – Gilead Sciences upgraded to Outperform from Market Perform at Bernstein
PCBK – Pacific Continental initiated with an Outperform at Keefe Bruyette
MAKO – MAKO Surgical initiated with an Outperform at William Blair
Downgrades
RIMM – Research In Motion initiated with a Hold at ThinkEquity
TTWO – Take-Two downgraded to Underperform from Neutral at Cowen
INTU – Intuit downgraded to Hold from Buy at Canaccord Genuity
ESRX – Express Scripts downgraded to Market Perform from Outperform at BMO Capital
GAP – Gap downgraded to Neutral from Overweight at Piper Jaffray
DFS – Discover Financial Services and Capital One (COF) initiated with Neutrals at Goldman
KNX – Knight Transportation downgraded to Market Perform from Outperform at Wells Fargo
NUVO – NuVasive initiated with a Sell at Madison Williams
LEAP – Leap Wireless downgraded to Neutral from Overweight at JP Morgan
PETS – PetMed Express coverage assumed with Underweight at Piper Jaffray
PCS – MetroPCS downgraded to Neutral from Overweight at JP Morgan
JPM – JPMorgan Chase initiated with a Hold at Stifel Nicolaus
ARO – Aeropostale downgraded to Hold at Stifel Nicolaus
Comments »Gapping up and Down This Morning
Gapping Up
BKS +24.7%, ACOR +21.4%, FL +8.9%, CRM +7.5%, BP +3.7%, OPXT +9.6%, STEC +4.6%, ZUMZ +3.5%,RRGB +10.8%, CEDC +2.7%, N +1.6%, CTXS +1.5%,CS+1.5%, BEXP +2%,TSN +0.8%, ZLC +13.3%, APC +4.7%, RIG +1.9%,
Gapping Down
GPS -15%, ARO -9.6%,AEO -3.6%, BPI -4.5%, LDK -4.4%, IMGN -4.1%, OFC -3.4%, INTU -2.5%, BPOP -7.6%, ARUN -1.8%,CSR -1.7%, SI -1.3%
Comments »In Play and On the Wires
Salesforce Earnings Beat the Street, But Profits Edged Lower YoY
“FRANCISCO (AP) — On-demand software company Salesforce.com Inc. said Thursday that its fiscal first-quarter profit shrank as rising operating expenses overshadowed revenue growth. The company’s results beat analyst expectations, though, and Salesforce shares rose more than 7 percent in extended trading.
For the quarter that ended April 30, Salesforce earned $530,000 and broke even on a per-share basis. This compares with a profit of $17.7 million, or 13 cents per share, in the year-ago quarter.
Excluding one-time items such as $48 million in stock-based compensation expenses, the company earned 28 cents per share — a penny more than what analysts polled by FactSet expected.
Revenue rose 34 percent to $504.4 million, much higher than the $482.6 million analysts were looking for. A year earlier, Salesforce collected revenue of $376.8 million.
The company said subscription and support revenue rose 35 percent to $473.5 million, while professional services and other revenue rose 18 percent to $30.9 million.
Operating expenses grew to $404.1 million, up 48 percent from $272.2 million.
The company said its net paying customers climbed 5,400 in the three-month period and it ended the quarter with 97,700 paying customers.
For the second quarter, Salesforce predicted it will either break even or report a loss of a penny per share. Excluding one-time items, it expects to report net income of 29 or 30 cents per share. The company forecast revenue of $526 million to $528 million.
Analysts are expecting adjusted net income of 27 cents per share on $506 million in revenue.
For the full fiscal year, the company expects a net loss of a penny to 3 cents per share, or earnings of $1.30 to $1.32 when excluding items. The company predicted revenue of $2.15 billion to $2.17 billion.
Analysts expect adjusted net income of $1.29 per share on $2.11 billion in revenue.
Salesforce shares climbed $9.99, or 7.4 percent, to $145.80 in after-hours trading after the earnings were released. The stock finished regular trading up $1.56 at $135.81.”
Comments »Intuit Beats by a Nickel and Raises Full Year Guidance
“MOUNTAIN VIEW, Calif. (AP) — Intuit Inc., the maker of tax filing software Turbo Tax, said Thursday that its third-quarter net income rose 19 percent as an increasing number of Americans went online to file income tax returns; Intuit raised its full-year forecast.
Its net income in the three months that ended April 30 rose to $688 million, or $2.20 per share, from $576 million, or $1.78 per share, a year ago.
Excluding stock compensation costs and amortization of intangible assets, adjusted earnings came to $2.33 per share, above the average of $2.27 expected by analysts polled by FactSet.
Revenue rose 15 percent to $1.85 billion from $1.61 billion, also above analysts’ forecast. They expected $1.82 billion.
Intuit repurchased $250 million worth of its common shares during the quarter, and it ended the period with 3 percent fewer shares outstanding than it had a year earlier.
The company said it expected fourth-quarter revenue of $567 million to $587 million and adjusted earnings between a loss of 2 cents per share and a gain of 2 cents per share. On average, analysts expected revenue of $587 million and a loss of a penny per share.
For the full year, Intuit raised its revenue forecast to $3.83 billion to $3.85 billion, above the $3.82 billion expected by analysts. It also said adjusted earnings would hit $2.45 to $2.50 per share, above the $2.41 to $2.48 it earlier forecast. Analysts were looking for annual adjusted earnings of $2.46 per share.
Shares dropped $1.70, or 3 percent, to $54.20 in after-hours trading, reversing a gain of $1.62, or 3 percent, during in the regular session, which it ended at $55.90.”
Comments »Gap Inc. Misses Q1 Estimates by a Country Mile; Stock Plummets in Pre-Market
“NEW YORK – Faster cost increases than Gap Inc. expected — especially for its lower-priced products — sank the company’s first-quarter profit, and the clothing company dramatically cut its forecast for full-year earnings late Thursday.
Escalating costs are only compounding challenges at the company, which is aiming to revive sales at its namesake brand. In fact, the company, which also operates the Banana Republic and Old Navy brands, acknowledged it also did more discounting than expected at the Gap chain in the latest quarter.
Gap’s shares fell $3.47, or 14.9 percent, to $19.82 after hours. They had ended regular trading at $23.29, up 21 cents.
The company said it is spending about 20 percent more than a year ago on each item it plans to sell in the second half of the year, particularly for the holidays, it biggest season. And its price increases won’t be able to keep pace.
“I will be quite honest with you. I don’t feel good about having to come here today and re-guide,” Gap CEO and Chairman Glenn Murphy said Thursday, referring during a call with investors to the company’s new earnings guidance. “But the 20 percent increase in our average unit costs in the back-half is real.”
Murphy said the cost pressure was a “near-term” challenge, not a structural issue, and noted that cotton prices already are retreating. He also reiterated that the company is moving forward with long-term initiatives, especially online and in other countries.
Gap said its net income fell 23 percent to $233 million, or 40 cents per share, for the quarter that ended April 30. That compares with $302 million, or 45 cents per share, a year earlier.
Its revenue fell 1 percent to $3.29 billion. Revenue fell most, nearly 4 percent, at its low-price Old Navy chain, which produces about 40 percent of the company’s revenue.
Analysts were expecting even worse performance — earnings of 39 cents and revenue of $3.27 billion, according to FactSet.”
Comments »European Markets Trade Flat to Marginally Higher
“Most European stocks rose, sending the benchmark StoxxEurope 600 Index higher for a third day, as investors speculated that the Federal Reserve will maintain its stimulus and BP Plc (BP/) rose in London trading. U.S. index futures slipped, while Asian shares were little changed.
BP advanced after the oil company reached a settlement with a unit of Mitsui & Co., one of its partners on the Macondo well.Micro Focus International Plc (MCRO) rallied 4.9 percent following a report that Advent International Corp. may buy the U.K. software producer.Mitchells & Butlers Plc (MAB), the British owner of Harvester and Toby Carvery pubs and restaurants, sank 5.2 percent after posting reduced fiscal first-half profit.
The Stoxx 600 increased 0.1 percent to 280.34 at 12:05 p.m. in London, heading for a weekly decline of 0.1 percent. Four stocks rose for every three that fell. The gauge advanced 0.7 percent yesterday as companies from Glencore International Plc to LinkedIn Corp. held initial public offerings. Even so, the measure has fallen 3.7 percent since this year’s high on Feb. 17.
“Valuations are cheap and extremely attractive compared with government or corporate bonds,” said Ian Richards, an equity strategist at Royal Bank of Scotland Plc in London. “The economic growth outlook is still okay and the U.S. and European countries are progressively addressing the structural debt problems.”
The benchmark MSCI Asia Pacific Index gained less than 0.1 percent, while futures on the Standard & Poor’s 500 Index expiring in June slipped 0.3 percent.”
Comments »Asian Stocks Fall Rounding Out Three Weeks of Declines
“Most Asian stocks fell, with the regional benchmark index set for a third straight weekly drop, as raw material producers declined on lower metal and oil prices utilities tumbled as Tokyo Electric Power Co. reported Japan’s biggest corporate loss in eight years.
Hyundai Motor Co. (005380), South Korea’s No. 1 carmaker, and Brambles Ltd. (BXB), the world’s largest supplier of wooden pallets, advanced at least 1.4 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, fell 1.7 percent in Sydney as oil and metal futures dropped. Kansai Electric Power Co. slumped 4.9 percent, leading declines in the Nikkei 225 Stock Average, after Tokyo Electric, owner of the nuclear reactor crippled by the March 11 earthquake and tsunami, posted a record loss.
“The market may have become oversold amid selling in the past three weeks,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages $98 billion in Sydney. “The soft patch of economic data from the U.S., along with tightening concerns inChina, the recession in Japan and Europe’s debt crisis will leave a volatile environment for the market in the next few months.”
The MSCI Asia Pacific Index gained 0.1 percent to 134.82 as of 7:27 p.m. in Tokyo, after swinging between gains and losses at least 10 times. About five stocks fell for every four that rose. The gauge is heading for its third weekly drop, the longest streak of weekly declines since November.
The regional benchmark index last week recorded its second straight weekly drop amid concern that China’s anti-inflation policies may slow global economic growth and as the U.S. Federal Reserve prepares to end a $600 billion asset-purchase program known as quantitative easing.
Bank of Japan”
Comments »Socialists Face Defeat In Spanish Elections After a Week of Protesting
“Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialists are headed for defeat in local and regional elections after a week of street protests and sits- in against his policies, polls show.
Thirteen regions accounting for 60 percent of the economy and more than 8,000 municipalities hold elections on May 22. Polls show Zapatero’s Socialists will be defeated in most regions, including traditional strongholds, and may lose the city of Barcelona for the first time in three decades.
Support for the Socialists has flagged as Zapatero turned his back on traditional allies to push through wage reductions and spending cuts to fight the sovereign-debt crisis. The run-up to the vote, a year before polls to choose Zapatero’s successor, has seen demonstrations against budget cuts, bank bailouts and a 30-year-old democracy that protesters say safeguards entrenched interests.”
Comments »Dangdang (DANG) Announces First Quarter 2011 Results
Net Revenues in Q1 2011 Increased by 53.4% Year-Over-Year
General Merchandise Revenue in Q1 2011 Increased by 161.6% Year-Over-Year… Read more
Comments »ECB Member Pushes For Easing of Monetary Policy
“European Central Bank policy makers should continue to withdraw unconventional tools designed to bolster bank lending as financial markets recover, Executive Board member Gertrude Tumpel-Gugerell said.
“The unwinding of our non-standard monetary policy measures has to go forward as financial conditions improve, not least to prevent moral hazard and delay in the needed financial sector restructuring,” she said at a conference in Frankfurt yesterday. At the same time, “governments have to work on regaining confidence, putting the necessary reforms in place.”
The ECB has phased out some of its longer-term refinancing measures introduced to fight the financial crisis and PresidentJean-Claude Trichet will announce in June whether the central bank will maintain unlimited funding over three months. ECB council member Luc Coene said on May 11 non-standard measures will be phased out “when possible.” ”
Comments »Analysis: OTC swaps face legal void as CFTC misses deadline
(Reuters) – Billions of dollars in derivatives will be headed into legal limbo if U.S. regulators don’t create a short-term fix to the market chaos that could be unleashed by missing a July financial reform deadline.
The Commodity Futures Trading Commission, in the midst of writing dozens of new rules, has said it will miss the July 16 deadline for implementing rules that give it oversight of the $600-trillion global over-the-counter derivatives market.
As a result, many of those contracts may lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000, which created a framework that stated they were not illegal off-exchange futures.
The impact of that legal void may be limited if market participants believe regulators will either set up a short-term bridging measure or simply opt not to enforce the rule; but without greater certainty, compliance officers face some sleepless nights.
“I’m sitting here right now trying to figure out what I have to do to make sure that my firm is in compliance on July 16. And I am struggling, big time. This is a real threat,” said Gary DeWaal, group general counsel for brokerage Newedge.
“We need to deal with this threat as an industry immediately. We cannot wait … because we need to plan.”
OTC trades soared in popularity after swaps were given legal protection, allowing commercial parties looking to offset their risk on interest rate shifts or commodity price swings to enter these deals without fear they would be invalidated or considering gambling.
But the CFTC has said it will miss the deadline for most rules that give it oversight of the $600-trillion global over-the-counter derivatives market.
Facing a gap between the protection regime under the current commodities act and the new rules from Dodd-Frank, market players are scratching their heads and fearing a worst-case scenario involving invalidated contracts, dried-up liquidity, and an Exodus to offshore trading.
LARGELY UNREGULATED
The OTC derivatives market, which includes commodity, interest-rate and foreign exchange swaps, started in the 1980s. In contrast to the futures marketplace, it was largely unregulated before last year’s Dodd-Frank law.
It has been an opaque marketplace dominated by a few dealers such as Wall Street giants JPMorgan Chase (JPM.N) and Goldman Sachs (GS.N). Some have said OTC derivatives worsened the 2008 financial crisis, as credit default swaps exposed major financial firms to each other’s riskiness.
To prevent another meltdown, the Dodd-Frank financial reform package requires that as many of these trades as possible be rerouted through central clearinghouses and trade on exchanges or other open venues rather than kept as private negotiations between counterparties.
Industry watchers are worried that with the impending legal uncertainty, contracts could be voided, and it could become easier for someone to walk away from a deal if terms turn sour.
“I don’t think the government can eliminate provisions like this and then not provide some type of comfort to transactions that are already done and in place,” said Greg Mocek, a former enforcement chief at the CFTC and now a partner at law firm Cadwalader Wickersham & Taft.
“There’s billions of dollars of contracts in existence and the CFTC should think about the negative impact the legal uncertainty could have on commerce,” he said.
“WE KNOW IT IS A PROBLEM”
As the July deadline gets closer, Republican CFTC commissioner Jill Sommers is pushing regulators to provide guidance for traders outlining what they plan to do.
“The whole idea behind legal certainty is to give the market certainty, and without some type of guidance at this point we’re not going to have it”, Sommers told Reuters.
“We know it is a problem but I am not sure if we plan to address it. Repealing certain provisions without having the replacement rules in place leaves a gaping hole and it is no doubt a flaw within the bill,” she said.
Those who follow the CFTC, including former CFTC officials, believe the agency’s general counsel, Dan Berkovitz, and his staff are considering not only what action is appropriate but what they can do under their legal purview.
Michael Philipp, a partner in Winston & Strawn’s financial services practice group that represents clients in futures and securities transactions, said it’s hard to quantify how much impact a failure to act could have on the industry.
He said if people continue to trade based on the assumption that regulators will not bring enforcement action, then the impact could be limited.
If people are concerned, it could reduce the number of OTC trades or could cause more transactions to move overseas.
The result could threaten liquidity, making markets thinner and more volatile.
“If they had the authority, (the best option) would be to simply preserve the status quo until the new regime comes into place, but I’m not sure that they’re going to conclude that they have the ability to do that,” said Philipp.
(Reporting by Christopher Doering in Washington, with additional reporting by Jonathan Spicer in New York; Editing by David Gregorio)
Comments »New Mines and Prices May Burst the Iron Ore Bubble
“The iron ore market has risen to “bubble” levels that will burst as new mines create oversupply of the steelmaking raw material, according to Baosteel Group Corp., China’s second-biggest mill.
“There is a bubble in this market, many are gambling,” making acquisitions and investment expensive, Chairman Xu Lejiangsaid in an interview in Shanghai, without saying when prices would drop. “Everyone who has money is rushing in to invest in iron ore.”
Vale SA (VALE3), Rio Tinto Group and BHP Billiton Ltd. (BHP), the three biggest suppliers, plan to spend $45 billion on mines. Global exports of iron ore may gain 28 percent to 1.4 billion metric tons by 2016, the Australian Bureau of Agricultural and Resource Economics and Sciences has forecast.”
Comments »Canadian Inflation Comes In Slower Than Expected
“Canada’s inflation rate was below economists’ forecasts in April as a decline in food prices tempered increases in gasoline.
Consumer prices rose 3.3 percent from a year earlier, matching the gain in March, Statistics Canada said today in Ottawa. Economists predicted a 3.4 percent gain based on the median estimate in a Bloomberg surveys of 27 economists. The index rose 0.3 percent in April from March, slower than the prior monthly gain of 1.1 percent and below the 0.5 percent forecast by economists.
Inflation will advance faster than 3 percent this quarter, Bank of Canada Governor Mark Carney said in a May 16 speech, which he said was “modestly stronger” than his earlier projection. Carney reiterated future interest-rate increases will be “carefully considered” after three rises last year, and said some of the higher inflation was due to temporary gains in sales taxes, food and energy costs.
Energy prices rose 17.1 percent in April from a year earlier, Statistics Canada said today. Gasoline prices rose 26.4 percent, bringing them within 5 percent of their record high posted in July 2008.”
Comments »Yingli (YGE) Q1 results below Wall Street on Italy subsidy woes
Q1 adj profit $0.35/ADS vs est. $0.39; Rev up at $527.3 mln vs est. $567.5 mln. Read more
Comments »Bank of Japan Holds Back The Printing Press
“The Bank of Japan’s policy board unanimously voted to maintain monetary policy even after a report yesterday showed the country slipped into a recession following a record earthquake.
Governor Masaaki Shirakawa and his eight colleagues decided to maintain a 30-trillion yen ($370 billion) credit program and a 10-trillion yen asset-purchase fund that represent the bank’s main policy tools. Deputy Governor Kiyohiko Nishimura dropped his call made last month to expand asset buys to provide more stimulus. The key overnight rate was kept at zero to 0.1 percent.
Signs of a deteriorating economy put renewed pressure on the BOJ to provide additional stimulus after it stepped-up asset purchases and flooded money markets with cash in the wake of the March 11 temblor. Shirakawa said the economy will rebound later this year as production and supply constraints ease, while warning about the outlook for electricity supply in the long run.
“Given that policy options are pretty limited, the BOJ probably wants to preserve as much ammunition as possible,” said Mari Iwashita, chief market economist at SMBC Nikko Securities Inc. in Tokyo. “Chances for additional easing are still alive and we could see the BOJ expand asset purchases by 5 trillion yen, as the deputy governor proposed, around August.” ”
Comments »Emerging Market Funds See Their First Outflows in Two Months
“Emerging-market equity funds reported the first net withdrawals in eight weeks as the strengthening dollar and weakening commodity prices sapped demand for riskier assets, Citigroup Inc. said.
Funds investing in developing nations reported outflows of $1.6 billion for the week ended May 18, Citigroup analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global. That compares with net inflows of $265 million in the previous week.
“U.S. dollar strength and commodity weakness amidst concerns with Greek debt restructuring has probably led to investor risk aversion and thus selling in emerging-market equities as a risk asset,” the analysts wrote.”
Comments »Tepco President Resigns
I know it is said he was forced to resign; but way to go when the going gets tough….
Comments »
