IMF Lowers U.S. Outlook; J&J, Crucell Deal

Arthi Gupta
06 Oct, 2010
New York City

U.S. stocks traded sideways after private sector employment unexpectedly fell in September. The OECD raised second quarter GDP growth outlook. Johnson & Johnson agreed to buy rest of Crucell for $2.4 billion and GE agreed to acquire Dresser for $3 billion.

[R]11:30 AM New York – U.S. stocks traded sideways after private sector employment unexpectedly fell in September. The OECD raised second quarter GDP growth outlook. Johnson & Johnson agreed to buy rest of Crucell for $2.4 billion and GE agreed to acquire Dresser for $3 billion.[/R]

Asian and European markets gained on cues of positive economic data.

The private sector employment unexpectedly decreased in the month of September. The private survey conducted by ADP said private sector employment fell by 39,000 jobs in September following a revised increase of 10,000 jobs in August.

In another report, the Institute for Supply Management said that activity in the U.S. service sector expanded for the ninth consecutive month in September. The ISM index of activity in the service sector rose to 53.2 in September from 51.5 in August.

The International Monetary Fund warned that the financial system remains the biggest threat to global recovery. In its latest Global Financial Stability Report released on Tuesday, the lender said stability in the global financial system had gradually improved over the past six months, although considerable risks remain.

Separately, the IMF stated the world economy would grow 4.8% this year, better than 4.6% predicted in July. However, global growth will decline to 4.2% next year from an earlier forecast of 4.3% growth for 2011.

The IMF predicted 2.6% growth for the U.S. this year, before slowing to 2.2% next year. Euro area growth will be around 1.7% in 2010 and 1.5% in 2011. China is projected to expand 10.5% in 2010, closely followed by India, which is expected to grow 9.7%.

The International Monetary Fund Managing Director Dominique Strauss-Kahn warned the use of the exchange rate by governments to solve domestic problems risks a currency war. In an interview published on the Financial Times Web site dated Tuesday, Strauss-Kahn said there is clearly the idea beginning to circulate that currencies can be used as a policy weapon.

The Organization for Economic Cooperation and Development said real gross domestic product rose 0.9% sequentially in the second quarter, revised up from the previous estimate of 0.7%. According to the OECD, gross fixed investment was the main contributor to the GDP increase, adding 0.4 percentage point to overall growth.

Germany, France, Italy, and the UK accelerated on a quarterly basis in the second quarter. But, growth in the United States and Canada was lower due to negative contributions from foreign trade. Conversely, in Japan, GDP growth of 0.4% was principally due to a higher foreign trade surplus.

Grupo Televisa, S.A. the Mexican broadcaster said it would invest $1.2 billion in cash and stock to buy effectively a 35% stake in Univision Communications, Inc., a Spanish-language television network in the U.S., with a view to extend its reach in the U.S. As per the deal, Televisa would also contribute 50% of its interest in TuTV joint venture to Univision.

In return of the investment, Televisa will get 5% stake in Univision and long-term liabilities convertible into 30% of Univision''s equity. In addition, the company will also get an option to buy a further 5% of Univision. Televisa investment is expected to expand the financial flexibility of Univision.

Johnson & Johnson announced a deal to acquire all outstanding equity of the Netherlands-based biopharmaceutical company Crucell N.V. that it does not already own for €24.75 per share or about €1.75 billion, approximately $2.43 billion in a recommended cash tender offer. The transaction, which is expected to close in the first quarter of 2011, is estimated to have a dilutive impact of about $0.03 to $0.05 on Johnson & Johnson''s 2011 earnings per share.

General Electric Company signed a $3 billion deal to acquire energy infrastructure technology and service provider Dresser, Inc., moving on with the strategy of expanding its $40 billion energy technology portfolio.

Earnings Review

Cedar Fair Entertainment Company ((FUN)), the theme-park operator reiterated its outlook for fiscal year 2010 revenues between $940 million and $965 million, and adjusted EBITDA, excluding one-time costs, between $320 million and $340 million.

Costco Wholesale Corp. ((COST)), the membership warehouse club operator said fourth quarter total revenue grew 7.8% to $24.13 billion from $22.38 billion in the same period last year. Net income in the quarter gained 15.5% to $432 million or 97 cents per diluted share, compared to net income of $374 million or 85 cents per share last year.

Diamond Foods, Inc. ((DMND)), the snack maker reported fourth quarter net sales increased 55% to $176.62 million from $113.82 million last year. Net income for the quarter soared 60% to $6.74 million or 30 cents per diluted share as against net income of $4.20 million or 25 cents per share in the previous year.

EMCORE Corporation ((EMKR)), the maker of semiconductor-based components and systems reported third quarter revenues increased 21% to $46.61 million from $38.49 million in the prior-year quarter. Net loss for the quarter narrowed 80% to $9.21 million or 11 cents per diluted share, compared to a net loss of $45.35 million or 57 cents per share in the year-ago quarter.

Inuvo, Inc. ((INUV)), the online marketing services company announced that revenue for the quarter ended September 30, 2010 would be about $14.1 million. This represents a 23% growth over the $11.5 million reported in the immediate prior quarter and a 52% increase over the $9.3 million reported in the third quarter of 2009.

Monsanto Co. ((MON)), the agricultural products maker said fourth quarter net sales increased 4% to $1.95 billion from $1.88 billion in the prior-year quarter. Net loss in the quarter narrowed 39% to $143 million or 26 cents per share compared to a net loss of $233 million or 43 cents per share in the year-ago period.

Team, Inc. ((TISI)), the specialty industrial services provider reported first quarter revenues grew 4% to $104.5 million from $100.9 million in the year-ago period. Net income in the quarter surged 239% to $3.80 million or 20 cents per diluted share, compared to net income of $1.12 million or 6 cents per share in the year-ago period.

Walgreen Company ((WAG)), the drugstore chain announced sales results for the month of September, reporting a 0.4% rise in comparable store sales and a 5.3% increase in total sales.

Yum! Brands, Inc. ((YUM)), the restaurant chains operator said third quarter revenues increased 3% to $2.86 billion from $2.78 billion in the prior-year quarter. Net income in the quarter rose 7% to $357 million or 74 cents per diluted share, compared with net income of $334 million or 69 cents per share for the year-ago quarter, as strong growth in China helped offset weakness in the company''s U.S. operations.