U.S. Stocks Higher; Industrial Production Declines

Arthi Gupta
18 Oct, 2010
New York City

U.S. stocks traded lower after Citigroup quarterly sales and net rose. St. Jude Medical agreed to buy AGA Medical for $1.3 billion including debt. Northeast Utilities agreed to acquire NSTAR in all stock $9.5 billion deal.

[R]9:35 AM New York – U.S. stocks traded lower after Citigroup quarterly sales and net rose. St. Jude Medical agreed to buy AGA Medical for $1.3 billion including debt. Northeast Utilities agreed to acquire NSTAR in all stock $9.5 billion deal.[/R]

U.S. stocks edged lower after the September industrial production decreased 0.2% after gaining 0.6% in August.

Manufacturing production fell 0.2% and mining rose 0.7%. Utility output fell 1.9% and capacity utilization for total industry decreased to 74.7%.

KKR offered up to A$1.75 billion for Australia''s Perpetual. BHP and Rio Tinto scrapped Western Australian iron ore venture.

Asian and European markets closed lower as investor demand more specifics from the U.S. Fed regarding any stimulus plan.

Market this week is awaiting a slew of economic reports and earnings from companies like Apple Inc., IBM Corp. and Citigroup Inc.

Perpetual Ltd., the Australian asset manager said on Sunday evening that U.S.-based private equity firm Kohlberg Kravis Roberts & Co. offered as much as $1.72 billion, nearly 29% premium to the closing price on Friday. The move is seen as part of KKR''s efforts to expand into Australia and tap the country''s A$1.4 trillion wealth management industry.

BP Plc, the British energy giant said it reached an agreement to sell its upstream businesses and associated interests in Venezuela and Vietnam to TNK-BP, a Russian oil company for a total of $1.8 billion. As per the terms of the deal, TNK-BP will pay BP a total deposit of $1.0 billion on October 29, with the balance of payment due on completion of the transaction.

BHP Billiton Ltd. and rival Anglo-Australian mining group Rio Tinto agreed to scrap their proposed joint venture deal to combine their Western Australian iron ore assets in Pilbara region, citing regulatory hurdles.

St. Jude Medical Inc. agreed to acquire AGA Medical Holdings Inc. for $20.80 per share in a cash and stock transaction valued at approximately $1.3 billion, including the assumption of approximately $225 million in outstanding debt.

The transaction is expected to be accretive to earnings in 2011 and beyond on a GAAP basis, excluding the increase to cost of goods sold related to the step up in inventory values required under purchase accounting.

Northeast Utilities, the Hartford-based utility system agreed to acquire rival Boston-based NSTAR, an energy delivery company for a total equity value of $9.5 billion. In the deal, each NSTAR share would receive 1.312 Northeast Utilities shares. After the merger the combined entity will have a total enterprise value of $17.5 billion.

Following the deal, the merged equity will continue to be called Northeast Utilities, and will provide electric and gas energy to over half of the customers in New England.

Northrop Grumman Corp. said that The Office of Naval Research selected Northrop Grumman to develop and demonstrate an innovative new scalable suite of electronic warfare, information operations and line-of-sight communications on naval surface platforms. The initial contract value is $18 million, with a total estimated value of $109 million over the next four years, if all contract options are exercised.

Clearwire Corp., the wireless broadband services provider said the company together with Sprint Nextel Corp. and Time Warner Cable Inc. plans to launch their respective 4G mobile internet services in New York later 2010. Each of the companies will offer 4G services under their own 4G brand, Clearwire noted.

American International Group, Inc. is in talks with potential investors to sell stakes in its Asian life insurance unit, American International Assurance Co. Ltd. as it launches an up to $20 billion initial public offering later this month to be listed on the Hong Kong Stock Exchange, according to media reports on Sunday.

Big institutional investors from China are said to pursuing substantial stakes in AIA, which is reportedly seeking to be independent of the U.S. parent company after its proposed listing on the Hong Kong Stock Exchange.

According to media reports, Japanese automaker Honda Motor Co., Ltd. is likely to exit from its joint venture with the Munjals of the Hero Group in Hero Honda. Honda Motor has 26% stake in Hero Honda.

Earnings Review

Allegheny Technologies Incorporated ((ATI)), the diversified specialty metals producer forecasts earnings for the third quarter to be about $0.01 per share, including charges. The third quarter results include an additional pretax LIFO ""catch up"" charge of about $33 million, or $0.21 per share, primarily due to higher nickel costs, and a one-time tax charge of $0.04 per share as a result of the Small Business Jobs and Credit Act signed into law in September 2010.

China Infrastructure Construction Corp. Limited ((CHNC.OB)), a ready-mix concrete provider said first quarter revenue increased 73% to $21.19 million from $12.26 million in the prior-year quarter. Net income in the quarter surged 108.4s% to $3.98 million from $1.91 million in the same quarter last year. On a per share basis, earnings for the quarter were $0.31 pence per share compared to $1.25 pence per share last year, as weighted average shares outstanding increased sharply.

Citigroup Inc. ((C)), the financial services provider reported third quarter revenues rose 1.7% to $20.74 billion, compared to $20.39 billion in the prior-year quarter. Net income generated in the quarter was $2.149 billion or 7 cents per diluted share, compared to a net loss of $3.242 billion or 27 cents per share in the year-ago quarter.

Entergy Corporation ((ETR)), the integrated energy company engaged said it expects third quarter 2010 as-reported earnings per share of around $2.61 and operational earnings per share of about $2.75.

Halliburton Company ((HAL)), the oilfield services provider reported third quarter revenues gained 30% to $4.67 billion, from $3.59 billion in the prior-year quarter. Net income in the quarter surged 108% to $544 million or 60 cents per diluted share, compared to net income of $262 million or 29 cents per share in the same quarter last year.

Hasbro, Inc. ((HAS)), the toy and boardgame company reported third quarter net revenues rose 3% to $1.31 billion from $1.28 billion a year ago. Net earnings in the quarter grew 3.2% to $155.2 million or $1.09 per share, compared to net earnings of $150.4 million or 99 cents per share a year ago.

Knoll, Inc. ((KNL)), the workplace furnishings, textiles and fine leathers designer reported third quarter sales increased 11.5% to $202.15 million from $181.28 million. Net income in the quarter rose 10.5% to $6.34 million or 14 cents per diluted share, compared with net income of $5.73 million or 13 cents per share in the previous year.

Koninklijke Philips Electronics NV ((PHG)), the consumer electronics company reported third quarter sales grew 10% to €6.16 billion from €5.62 billion a year earlier. Net income in the quarter surged to €524 million or 0.55 euro per share from €174 million or 0.19 euro per share in the prior-year quarter.

Kronos Worldwide, Inc. ((KRO)), the producer and marketer of titanium dioxide pigments provided net income and sales guidance for the third quarter. Net income is now estimated to be $32.1 million or $0.66 per share and net sales are projected at $376.6 million for the third quarter.

New Oriental Education & Technology Group Inc. ((EDU)), a Chinese provider of private educational services, reported first quarter net revenues climbed 28.8% to $192.31 million from $149.36 million a year ago. Net income in the quarter rose 9.3% to $62.36 million, compared to net income of $57.07 million in the prior-year quarter. Net income per ADS attributable to New Oriental rose to $1.61 from $1.47 in the year-ago quarter.

WD-40 Company ((WDFC)), the specialty chemicals maker reported fourth quarter net sales increased 4% to $80.68 million from $77.75 million last year. Net income in the quarter declined 10% to $6.89 million or 41 cents per diluted share, compared with net income of $7.62 million or 46 cents per share in the previous year.