Tim Cook Feels the Heat: $AAPL Earnings Preview

“Apple Inc. (AAPL) Chief Executive Officer Tim Cook is feeling the heat.

Eighteen months after taking over from Steve Jobs, Cook is facing rising production costs, competition from Samsung Electronics Co. (005930) and slowing growth in smartphones, threatening profits for the world’s most valuable company.

An earnings report tomorrow may show that fiscal first- quarter net income slipped 2 percent to $12.8 billion, or $13.48 a share, according to analysts’ estimates compiled by Bloomberg. In all except one quarter since 2003, profit has jumped more than 10 percent. Analysts project sales will rise 18 percent to $54.8 billion, the slowest growth rate since 2009.

Apple’s shares have dropped almost 30 percent since September, erasing about $190 billion in market value, on concern that demand for iPhones and iPads is ebbing. Cook, 52, overhauled most of the company’s product line ahead of the holiday shopping season, and results for the period will show for the first time whether the effort paid off.

“Sentiment could not be worse,” said Peter Karazeris, an analyst at Thrivent Financial for Lutherans, which owned about 647,000 Apple shares as of September. “It does take something fundamental to turn that, and we’ll see if they can deliver.”

Apple often reports results that surpass even the most optimistic projections, and it’s possible the company will do so again tomorrow. The company has exceeded analysts’ estimates for earnings in all but three quarters since at least 2006, according to data compiled by Bloomberg.

Parts Purchases…”

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“AT&T Inc. (T), the second-largest U.S. wireless carrier, agreed to buy spectrum and subscribers from Atlantic Tele-Network Inc. (ATNI) for $780 million in cash, bolstering the company’s network and bringing in 585,000 new customers.

The deal includes the purchase of licenses, network assets and retail stores, Dallas-based AT&T said today in a statement. The spectrum is in the 700-, 850- and 1900-megahertz bands, making it complementary to AT&T’s network, the company said. Atlantic Tele-Network operates under the Alltel brand in six states, mostly in the South and Midwest.

AT&T, led by Chief Executive Officer Randall Stephenson, has been snapping up airwaves in a bid to catch up with Verizon Wireless, the No. 1 U.S. carrier. Verizon won approval last year to buy airwave rights from Comcast Corp. (CMCSA) and other cable customers for about $3.6 billion. Wireless carriers rely on spectrum to transmit phone calls and data to mobile devices.

Demand for spectrum has increased consolidation in the wireless business and buoyed the values of companies that own a desirable collection of airwaves. With today’s deal, AT&T is acquiring operations that ATNI bought from Verizon in 2010 for $223 million. That means the business has more than tripled in value, despite losing more than 200,000 subscribers, saidChris King, an analyst at Stifel Nicolaus & Co. in Baltimore.

“Clearly the deal is a hugely successful investment for ATNI,” King said in a note to investors.

AT&T shares were little changed in New York today, trading at $33.45 at 10:03 a.m. in New York. The stock climbed 11 percent last year. ATNI, based in Beverly, Massachusetts, jumped 17 percent to $45.99….”

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“The Chinese yuan is on track to become a global currency and could even displace the U.S. dollar as the world’s reserve currency, experts say.

China is opening its financial markets to foreign investors and encouraging its currency to be used more in international trade, CNBC reports. Countries that have substantial trade with China, such as Australia, are among the first to base their trade settlements on the yuan, also called the renminbi, since it lowers their transaction costs.

International payments in the yuan jumped 24 percent in November from October, reaching a record 0.56 percent of the global total, CNBC reports, citing data from SWIFT, a transactions services organization….”

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a 1% drop…

“Regulators and banks should develop a system whereby lenders go bust without damaging the world economy to help restore public trust in the industry, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said.

“We’ve got to get rid of too big to fail,” Dimon, 56, told investors during a panel discussion in the German town of Koenigstein, near Frankfurt, Monday.

“We have to ensure big banks can be taken down without harming the public and at no cost to them.”

Governments and central banks propped up banks with trillions of dollars to prevent further shocks to the financial system and ensure the flow of credit to the economy following the collapse of Lehman Brothers Holdings Inc. in 2008.

Regulators are pushing banks to strengthen capital reserves and liquidity to help them weather financial shocks and avoid taxpayer-funded rescues.

“There’s still the presumption that we can’t let some global banks go to the wall,” Deutsche Bank co-CEO Anshu Jain said at the same panel. Some countries such as Spain don’t feel confident enough to allow smaller lenders to fail, he said….”

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“After dropping for the past two years, global unemployment is on the rise again according to the International Labor Organization, a UN jobs watchdog. 2013 is expected to top 200 million unemployed for the first time with the epicenter in the advanced economies as 28 million jobs have been lost since the onset of the crisis. Critically, for the globalists, they unsurprisingly note that macro imbalances have been passed on to the labor market to a significant degree.

Weakened by faltering aggregate demand, the labor market has been further hit by fiscal austerity programs in a number of countries, which often involved direct cutbacks in employment and wages, directly impacting labor markets. Far from the anti-cyclical response to the initial crisis in 2009 and 2010, the policy reaction has been pro-cyclical in many cases in 2011 and 2012….”

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“Shares of insurance company Travelers Cos were signaling a positive start Tuesday, climbing in pre-market trading. The gain came after the company managed to post a fourth-quarter profit despite the impact of Superstorm Sandy.

Travelers reported operating income of $278 million, or 72 cents per share, down 54.4% from $609 million a  year earlier but still ahead of analyst expectations.

Sandy was the culprit behind the drop, producing the bulk of a sizable increase in catastrophe losses over the prior year. Losses from Sandy accounted for $669 million of the $689 million in after-tax catastrophe losses at Travelers (and more than $1 billion pre-tax). In the similar quarter a year ago after-tax catastrophe losses were just $68 million.

Despite the hit from Sandy, Travelers full-year operating income was up 71.4% to $2.4 billion. “We are pleased with our fourth quarter results, as well as our full year results, particularly in light of Storm Sandy,” said Chairman and CEO Jay Fishman, touting the encouraging pricing trends and renewal rates across the company’s business lines….”

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“(Reuters) – Germany, France and nine other euro zone countries got a go-ahead on Tuesday to implement a tax on trading, despite the reservations of financial centers such as London and Luxembourg that are worried it could drive business out of Europe.

EU finance ministers gave their approval at a meeting in Brussels, allowing 11 states to pursue a financial transactions tax. The 11 are: Germany,France, Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

The levy, based on an idea proposed by U.S. economist James Tobin more than 40 years ago but little considered since, is symbolically important in showing that politicians, who have fumbled their way through five years of financial crisis, are getting to grips with the banks blamed for causing it.

“This is a major milestone in tax history,” Algirdas Semeta, the European commissioner in charge of tax policy, told reporters after ministers backed the scheme.

Under EU rules, a minimum of nine countries can cooperate on legislation using a process called enhanced cooperation as long as a majority of the EU’s 27 countries give their permission.

Britain, which has its own duty on the trading of shares, abstained in the vote, along with Luxembourg, the Czech Republic and Malta, said an EU official attending the meeting….”

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“One report from the Federal Reserve Bank of Chicago is the National Activity Index for the month of December, which was released this morning. It is somewhat misleading by the name because it is a regional Federal Reserve branch issuing the report but it is a national report.

The index came to only 0.02 in December. Bloomberg had a consensus reading of 0.28 and a range from economists of 0.10 to 0.50. The reading in November was 0.27. The three-month average increased marginally but remained in negative territory at -0.11.

Of the four components making up the index, two were positive. Employment stood out at 0.09, versus a prior reading of -0.02. The lagging areas were in consumption and housing and in production….”

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“Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported fourth quarter and full-year 2012 results before markets opened this morning. The mining company posted diluted quarterly earnings per share (EPS) of $0.78 on revenues of $4.51 billion. In the same period a year ago, Freeport-McMoRan reported EPS of $0.67 on $4.16 billion in revenues. Fourth-quarter results also compare to the consensus estimates for EPS of $0.70 on revenues of $4.47 billion.

For the full year, the company reported adjusted EPS of $3.19 on revenues of $18.01 billion, compared with EPS of $4.78 in 2011 on revenues of $20.88 billion. The consensus estimates called for EPS of $3.15 on revenues of $18.15 billion.

The company’s CEO said…”

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AMGN, ARMH, BBVA, CHTR, CMCSA, GLW, DTV, DO, DISH, ET, FE, JCP, LRCX, LIFE, LNKD, PBF, SCHS, SLB, SYMC, TIF, TWC, WCC,

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In Play ,

On the Wires 

“Tired of all this bullishness, and talk about how there’s nothing to worry about anymore?

Don’t worry. That’s why God gave us Nouriel Roubini.

He has a new article at Project Syndicate that could pretty much be titled: Things still suck.

It’s actually titled The Economic Fundamentals of 2013 and, spoiler alert, he says the fundamentals aren’t good.

Roubini identifies four big risks to the global economy.

They are….”

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“Shares of Caterpillar, the world’s largest construction equipment manufacturer, are falling in pre-market trading today after the company announced a big writedown on Friday after the closing bell.

The $580 million charge announced by Caterpillar on Friday afternoon relates to an acquisition the company made in China last year. It paid $800 million for the company, Siwei, but the target company’s management team had apparently been fudging the books for quite some time, leading Caterpillar to wildly overpay for the acquisition.

BofA Merrill Lynch analyst Ross Gjilardi has a good summary of the writedown:

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“DOVER, Del. (AP) — Chemical and bioscience company DuPont Co. says weakness in its performance chemicals and electronics and communications businesses, coupled with costs associated with growth initiatives, led to a sharp drop in fourth-quarter income.

The company on Tuesday reported net income for the quarter ending Dec. 31 of $111 million, or 12 cents per share, excluding significant items, compared to net income of $373 million, or 40 cents per share, for the fourth quarter of 2011.

But the results beat the consensus estimate of Wall Street analysts of 7 cents per share. Its shares rose 91 cents, or 1.9 percent, to $47.90 in premarket trading.

DuPont chairwoman and CEO Ellen Kullman said the company is stronger than it was a year ago, having posted a record year in new product introductions.

“However, weakness in markets served by performance chemicals and electronics and communications provided significant challenges in 2012,” she said. “We’ve adjusted our plans to meet the changing market environment and grow our businesses in a slow-growth world economy.”

Sales for the quarter were flat at $7.3 billion, with currency effects and portfolio changes offsetting a 3 percent increase in global volumes. Sales in Latin America grew 10 percent, with an 8 percent volume gain and a 7 percent increase in local prices. A 6 percent increase in volume in the Asia-Pacific region, was offset by negative currency and pricing effects.

Analysts expected revenue of $7.2 billion.

One-time items affecting fourth-quarter results included $135 million to resolve legal claims stemming from the use of DuPont’s Imprelis weedkiller, bringing the total amount spent on Imprelis claims to $750 million.

DuPont, based in Wilmington, Del., also recorded asset impairment and restructuring charges totaling $99 million, and a pretax gain of $117 million associated with the sale of a business within its agricultural unit….”

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“NEW YORK (AP) — Verizon Communications’ fourth-quarter loss widened, dragged down by restructuring, pension and Superstorm Sandy costs. The company activated a record number of new devices on its contract-based plans during the period.

The parent of the country’s biggest wireless carrier lost $4.23 billion, or $1.48 per share, for the period ended Dec. 31. That compares with a loss of $2.02 billion or 71 cents per share, a year ago.

Adjusted earnings were 38 cents per share, which includes 7 cents per share for Superstorm Sandy. When stripping out Sandy’s impact, earnings were 45 cents per share.

Operating revenue rose 6 percent to $30.05 billion from $28.44 billion.

Analysts polled by FactSet expected earnings of 50 cents per share on revenue of $29.82 billion.

The company’s stock fell 84 cents, or 2 percent, to $41.70 in premarket trading Tuesday.

Verizon Wireless revenue climbed 9.5 percent to $20 billion. At the wireline division, operating revenue fell 1.5 percent to $10 billion.

Verizon Communications Inc. activated 2.1 million net new devices on contract-based plans, helped by the iPhone 5’s launch and by data plans rolled out over the summer.

There were 144,000 FiOS Internet and 134,000 FiOS Video net additions in the quarter, bringing the company to a total of 5.4 million FiOS Internet and 4.7 million FiOS Video customers.

For the year, Verizon Communications earned $875 million, or 31 cents per share. In the previous year it earned $2.4 billion, or 85 cents per share. Annual operating revenue increased to $115.85 billion from $110.88 billion.

Total debt for 2012 declined to $52 billion from $55.2 billion.

Verizon’s report marks the debut for telecommunications companies this earnings season. Rival AT&T Inc. reports on Thursday.”

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“NEW BRUNSWICK, N.J. (AP) — Higher sales helped Johnson & Johnson post a much bigger fourth-quarter profit than a year ago, when a slew of charges depressed results.

The New Brunswick, N.J., company says net income was $2.57 billion, or 91 cents per share, up from $218 million, or 8 cents per share, in 2011’s fourth quarter.

Excluding about $800 million in one-time acquisition and litigation charges, earnings in the latest quarter would have been $3.38 billion, or $1.19 per share. That beat the expectation of analysts by 2 cents per share.

The maker of prescription drugs, consumer health products and medical devices says revenue totaled $17.56 billion, just shy of analysts’ average estimate of $17.69 billion.

J&J said it expects full-year profit of $5.35 to $5.45 per share. Analysts had expected $5.49.”

Source

“MINNEAPOLIS (AP) — Delta says its fourth-quarter profit was nearly wiped out by Superstorm Sandy and special charges.

Delta recorded a profit of $7 million for the quarter, or a penny per share. During the same period last year it earned $425 million, or 51 cents per share.

Delta says that without special items it would have earned $238 million, or 28 cents per share.

Revenue rose 2 percent to $8.6 billion. Both its adjusted profit and its revenue were slightly better than expected by analysts surveyed by FactSet.

Superstorm Sandy hurt revenue by $75 million. The storm slowed down the re-opening of Delta’s new oil refinery, causing a $63 million loss at the refinery.

Shares of Delta Air Lines Inc., based in Atlanta, are up a penny to $13.62 in premarket trading.”