U.S. Personal Income Dips; McKesson to Acquire US Oncology for $2.2 B

Arthi Gupta
01 Nov, 2010
New York City

U.S. stocks gained after manufacturing index in China rose to 6-month high. U.S. personal income unexpectedly fell 0.1% in September. AIG raised $20.5 billion through AIA IPO. McKesson agreed to acquire U.S. Oncology for $2.16 billion in cash.

[R]9:35 AM New York – U.S. stocks gained after manufacturing index in China rose to 6-month high. U.S. personal income unexpectedly fell 0.1% in September. AIG raised $20.5 billion through AIA IPO. McKesson agreed to acquire U.S. Oncology for $2.16 billion in cash.[/R]

Asian and European markets traded higher after China reported sustained manufacturing expansion on domestic construction industry and stable exports.

Personal income in the U.S. unexpectedly showed a modest decrease in the month of September, with the report also showing a smaller than expected increase in personal spending.

The latest report from the Commerce Department showed that personal income edged down 0.1% in September following a revised 0.4% increase in August. However, personal spending increased 0.2% in September after rising by a revised 0.5% in August.

The major events scheduled for the week are the mid-term U.S. elections, the FOMC meeting and the jobs report apart from the manufacturing index, auto sales, same store sales from retailers and personal consumption and personal income data.

McKesson Corp., a healthcare services and information technology company signed an agreement to acquire US Oncology, an integrated oncology company, for approximately $2.16 billion in cash. The total transaction included the assumption of all outstanding debt.

Interline Brands agreed to buy CleanSource for $60.1 million. Genesco Board authorized $35 million stock buyback. Fox Networks and Cablevision agreed on new distribution pact. Masergy Communications filed for $100 million IPO.

Manufacturing index tracked by China Federation of Logistics and Purchase and National Bureau of Statistics increased to 54.7 in October from 53.8 in September. Another index tracked by HSBC Holdings Plc and Markit Economics increased to 54.8 from 52.9.

The purchasing managers’ index, widely known as PMI showed a sustained manufacturing growth as exports rebound and construction activities stay robust.

American International Group Inc. raised nearly $37 billion to repay the United States government through its sale of one insurance unit, American Life Insurance Company or ALICO, and the initial public offering of a second, AIA Group Ltd.

AIG expects to use the cash proceeds from the ALICO and AIA transactions to repay the credit facility extended to AIG by the Federal Reserve Bank of New York and to make payments on other interests owned by the government, under terms of the Agreement in Principle announced by AIG as part of its recapitalization plan on September 30.

In related news, MetLife, Inc. completed the acquisition of American Life Insurance Co. or Alico, the non-U.S. insurance unit of American International Group, Inc. for $16.2 billion. The transaction would strengthen MetLife''s presence in Japan, the world''s second-largest life insurance market, while the company''s position in Europe will be advanced.

Fox Networks, a primary operating unit of News Corp. and Cablevision reached a joint agreement in principle for a new distribution agreement. Terms of the agreement were not disclosed.

Fox Networks stated that the agreement is to provide more than 3 million households with programming from WNYW FOX5 and WWOR My9 in New York, WTXF FOX29 in Philadelphia, and the cable channels FOX Deportes, FOX Business Network, and Nat Geo WILD.

General Electric Co. said its unit, GE Healthcare, entered into an agreement to acquire the assets of Orbotech Medical Solutions Ltd., a subsidiary of Orbotech Ltd. Under the deal, GE Healthcare will pay $9 million in cash at closing of the deal, and up to an additional $5 million in cash, subject to the achievement of certain agreed performance-based milestones.

Interline Brands, Inc. acquired substantially all of the assets of CleanSource, Inc., a distributor of janitorial and sanitation supplies, for $60.1 million, comprised of $54.6 million in cash plus an earn-out of up to $5.5 million in cash over the next two years, subject to working capital and other closing adjustments.

Genesco Inc. said on Friday that its board of directors authorized it to repurchase up to $35 million of the company''s common stock. The authorization replaces the remaining balance of a previous $35 million repurchase program authorized in February, pursuant to which the company repurchased about 844,000 shares at a total cost of about $24.2 million, including about 435,000 shares repurchased during the company''s third quarter ending October 30 at a total cost of about $13.0 million.

Masergy Communications Inc., the network-services provider plans to raise up to $100 million through an initial public offering, according to a registration statement on Form S-1 filed with the regulator on Friday. Pricing terms of the offering were not disclosed.

The company plans to use offering net proceeds for general corporate purposes, including capital expenditures and working capital.

BG Group plc, the British energy firm announced on Sunday that it will begin immediately the development and construction of the $15 billion Queensland Curtis Liquefied Natural Gas project or QCLNG, near Gladstone in Australia''s Queensland state. The company''s single biggest investment will see the development of the world''s first LNG plant fed by coal seam gas. The investment into the first phase of the project was finalized after it received the Australian Federal and State Government environmental approvals.

Exco Resources, Inc., the oil and natural gas company received a proposal from its Chairman and Chief Executive Officer Douglas Miller to buy all of the outstanding shares of the company''s stock not already owned by Miller for $20.50 per share in cash.

Forest Laboratories, Inc., the drug maker said the U.S. Food and Drug Administration approved Teflaro for the treatment of community-acquired bacterial pneumonia, and also for skin related infections.

Earnings Review

Baker Hughes Incorporated ((BHI)), the company engaged in the oilfield services industry stated third quarter revenues surged 83% to $4.08 billion, from $2.23 billion for the third quarter 2009. Net income in the quarter soared 364% to $255 million or 59 cents per diluted share, compared to net income of $55 million or 18 cents per share in the third quarter last year, helped by strong North America business performance.

Barnes Group Inc. ((B)), the logistical services company said third quarter net sales rose 11.4% to $289.9 million from $260.3 million last year. Net income in the quarter increased 39% to $15.1 million or 27 cents per diluted share, compared to net income of $10.9 million or 20 cents per share prior year.

Ensco plc ((ESV)), the offshore contract drilling company said it raised the lower end of its revenue outlook for the fourth quarter of 2010 and now expects revenue of $375 million to $400 million, compared to its prior estimate of $345 million to $400 million.

Entergy Corporation ((ETR)), the integrated energy company provided an update to its long-term financial outlook and also increased its common-stock repurchase program by $500 million.

The electricity distributor expects full-year 2011 earnings in the range of $6.35 to $6.85 per share, both on as-reported and operational bases.

Fluor Corporation ((FLR)), the engineering and construction service provider lowered its earnings guidance for the full-year 2010 once again on charges related to an adverse ruling over the priority of claims relating to the SR-125 road project in California made by its 50/50 joint venture against a bankrupt client in California. Due to the ruling, the company will take a charge of $0.32 per share for the full year, with earnings expected to come in short of analysts'' estimates.

The company currently expects full-year earnings in the range of $1.90 to $2.20 per share from the earlier projection of earnings in the range of $2.20 to $2.50 per share for 2010.

Hawaiian Electric Industries, Inc. ((HE)), the largest supplier of electricity in the state of Hawaii reported third quarter revenues increased 12% to $694.54 million from $620.31 million in the prior-year quarter. Net income in the quarter fell 3.3% to $32.4 million or 35 cents per diluted share, compared to net income of $33.5 million or 37 cents per share in the year-ago quarter.

Loews Corporation ((L)), the diversified holding company reported third quarter total revenues fell 1.1% to $3.70 billion, from the previous year''s $3.74 billion. Net income in the quarter plummeted 92% to $36 million or 9 cents per diluted share, compared to net income of $468 million or $1.08 per share in the prior-year quarter, reflecting lower revenues as well as a hefty charge related to the Loss Portfolio Transfer agreement.

Merck & Co., Inc. ((MRK)), the drug maker reported third quarter sales surged 84% to $11.12 billion, from $6.05 billion in the prior-year quarter. Net income in the quarter plunged 90% to $341.6 million or 11 cents per diluted share, compared to net income of $3.424 billion or $1.61 per share in the same quarter last year, hurt by a hefty legal reserve it made in connection with the U.S. government''s investigation into recalled arthritis drug Vioxx.

Northeast Utilities ((NU)), the power company said third quarter revenues fell 5% to $1.2 billion from $1.3 billion in the same quarter last year. Net income in the quarter surged 55% to $100.5 million or 57 cents per diluted share, compared to net income of $64.8 million or 37 cents per share for the year-ago quarter, helped by higher electricity sales due to warmer than normal summer weather and better costs control.

NSTAR ((NST)), the electricity distributor reported third quarter revenues increased 6.9% to $797.50 million from $746.13 million last year. Net income in the quarter rose 13% to $97.24 million or 93 cents per diluted share, compared to net income of $86.43 million or 80 cents per share a year ago, due primarily to charges related to income tax settlement that more than offset a rise in revenues.

Progress Energy, Inc. ((PGN)), the electric utility reported third quarter revenue rose 4.9% to $2.96 billion from $2.82 billion in the previous year. Net profit in the quarter soared 46% to $361 million, or $1.23 a share, compared to net profit of $247 million, or 88 cents a share, a year earlier, which included a $101 million litigation charge, as revenues increased year-over-year, helped by a favorable weather.

UIL Holdings Corporation ((UIL)), the electric utility company reported third quarter revenues fell 7.4% to $236.3 million from $255.2 million in the previous year''s third quarter. Net income in the quarter slumped 25% to $16.3 million or 50 cents per diluted share, compared to net income of $21.7 million or 73 cents per share last year, hurt by lower revenues and acquisition related expenses.