U.S. Jobless Claims Soar; PepsiCo, Wimm-Bill-Dann $3.8 B Deal

Arthi Gupta
02 Dec, 2010
New York City

U.S. stocks traded higher after Spain successfully raised nearly

[R]9:35 AM New York – U.S. stocks traded higher after Spain successfully raised nearly €2.5 billion selling three-year bonds. The European Central Bank held key rate at 1%. U.S. weekly jobless claims increased 26,000. PepsiCo agreed to acquire stake in Russia-based Wimm-Bill-Dann for $3.8 billion.[/R]

U.S. stocks traded higher after Spain completed the sale of 3-year bonds and ECB left key lending rate at 1%. Speculation was also rife that the U.S. may offer more capital to the IMF.

Spain sold 3-year bonds €2.5 billion today in the first bond auction held by the country since the Ireland received a €85-billion bailout. However, the yield on the bonds jumped to over 3.7% compared to a previous three-year bond yield of 2.5%.

Interior Secretary Ken Salazar announced that the administration will not be lifting the drilling moratorium in certain areas off U.S. coasts. The new policy will keep in place an existing moratorium on new drilling in the eastern Gulf of Mexico as well as delaying new drilling off the Atlantic coast until 2017.

RealtyTrac said foreclosure homes accounted for 25% of all U.S. residential sales in the third quarter. In the quarter, the average sales price of properties in some stage of foreclosure was $169,523, down 2.46% from the previous quarter and down 0.44% from the third quarter of 2009.

Major automakers reported strong U.S. vehicle sales in November amid growing consumer demand in an improving economy. General Motors Co., Ford Motor Co. and Chrysler Group LLC saw double digit sales growth, while Toyota Motor Corp. reported a drop in sales.

Jobless Claims Surge

Seasonally adjusted weekly jobless claims increased 26,000 to 436,000 from the revised previous week claims of 410,000. The preliminary insured unemployment rate in the week ending November 20 changed to 3.4% from the prior week''s revised rate of 3.4%.

Manufacturing Activity Slows; Monster Employment Index Falls

The Institute for Supply Management said that activity in the U.S. manufacturing sector expanded at a slower pace in November. The ISM manufacturing index edged down to 56.6 in November from 56.9 in October.

The Monster Employment Index for the U.S. fell to 134 in November from 136 in October. The indicator rose 13% annually.

PepsiCo Acquires Stake in Wimm-Bill-Dann

PepsiCo, Inc. agreed to acquire 66% of Russia''s leading branded food-and-beverage company Wimm-Bill-Dann Foods OJSC for $3.8 billion.

The total enterprise value of the deal is nearly $5.4 billion. The transaction is expected to make PepsiCo the largest food-and-beverage business in Russia and increase PepsiCo''s annual global revenues from nutritious and functional foods to about $13 billion from the current $10 billion.

Endo Pharma Acquires Qualitest Pharmaceuticals

Endo Pharmaceuticals announced the completion of its acquisition of Qualitest Pharmaceuticals. Endo announced Sept. 28 that it entered into an agreement to acquire Qualitest Pharmaceuticals for approximately $1.2 billion in cash.

The acquisition is a key step for Endo to remain frontrunner in providing pain solutions, as more than 90% of all pain prescriptions are now filled by generic drugs in the $15 billion U.S. pain market. In addition, 40% of Qualitest''s revenues are derived from pain products.

Earnings Review

Aeropostale, Inc. ((ARO)), the teen apparel retailer said third quarter net sales rose 6% to $602.76 million from $567.84 million in the same period last year. Net income for the quarter declined 7% to $58.5 million or 63 cents per diluted share, compared to net income of $62.6 million or 61 cents per share for the year-ago quarter.

Costco Wholesale Corporation ((COST)), the warehouse operator said its November comparable sales, including Mexico operations for last year and this year, grew 9%. Inflation in gasoline prices and strengthening foreign currencies had a positive impact on comparable sales.

Endo Pharmaceuticals Holdings, Inc. ((ENDP)), the specialty pharmaceutical company raised 2010 guidance for revenue to approximately $1.7 billion from guidance of between $1.63 billion and $1.68 billion and increased adjusted EPS view to a range of $3.35 to $3.40 from $3.30 to $3.35 per share range. The changes in 2010 financial guidance reflect the earlier than expected close of the Qualitest transaction.

General Motors Co. ((GM)), the automotive company reported an 11.4% increase in vehicle sales for November, compared to the same month last year. Total unit sales increased to 168,739, up 11.4% from last year. November sales for the company''s four major brands increased 21% to 168,704 from last year.

Jo-Ann Stores, Inc. ((JAS)), the specialty retailer reported third quarter net sales increased 5.1% to $535.3 million from $509.1 million in the same period last year. Same-store sales increased 4.1%. Net income in the quarter rose 21% to $29.1 million or $1.09 per diluted share, compared to net income of $24.1 million or 90 cents per share in the third quarter last year.

Regal-Beloit Corporation ((RBC)), the manufacturers of electric motors announced that it lowered its fourth quarter earnings view to between $0.63 and $0.67 per share from prior expected range of $0.69 to $0.75 per share.

Synopsys, Inc. ((SNPS)), the company engaged in the electronic design automation software said fourth quarter total revenue increased 11% to $375.46 million from $338.28 million a year ago. Net income in the quarter increased 30% to $25.40 million or 17 cents per diluted share, compared to net income of $19.53 million or 13 cents per share in the previous year.

Toll Brothers, Inc. ((TOL)), the luxury homebuilder reported fourth quarter revenues declined 17.2% to $402.6 million from $486.59 million in the prior-year quarter. Net income generated in the quarter was $50.48 million or 30 cents per diluted share, compared to net loss of $111.43 million or 68 cents per share last year.

For the fiscal year 2010, the company reported a net loss of $3.37 million or $0.02 per share, compared to a net loss of $755.8 million or $4.68 per share in the prior year. Home building revenues for the year declined 15% to $1.49 billion.