HMOs Decline on Aetna and WellPoint

123jump.com Staff
27 Apr, 2006
New York City

Market averages bounced back in the afternoon trading led by a rise in tech stocks. HMO stocks declined on the earnings news from Aetna and WellPoint. Pulte Homes guided lower second quarter earnings. NCR missed revenue target. Rockwell delivered better than expected earnings. Exxon Mobil reported $8.4 billion earnings. Office Max jumped up 5% on 77 cents earnings vs. 17 cents a year ago.

[R]3:00PM HMOs fall out of favor.[/R]
HMO stocks fell as WellPoint and Aetna delivered better than expected results. Aetna reported first quarter earnings of 68 cents vs. 64 cents a year ago and penny ahead of estimates. The company also announced the resignation of its chairman and chief financial officer. Aetna ((AET)) was downgraded by Citigroup of medical cost ratio concerns. The stock dropped 22% or $10 in the late afternoon trading. Membership in the Aetna’s health plan rose 663,000 to 15.4 million. Revenue rose to $6.2 billion, 15% higher on increased premiums. Cigna Group ((CI)) and WellPoint ((WLP)) dropped 12% and 5% respectively. Investors are worried that the companies may resort to price discount.

[R]12:30PM European stocks closed lower on commodities.[/R]
European markets closed in the negative on weaker commodity stocks, mixed earnings reports and deal talk involving companies like Siemens, DaimlerChrysler and GlaxoSmithKline. Metals prices moved lower after China lifted its base interest rate to 5.85%. Major mining companies like Rio Tinto and BHP Billiton sent the resource sector down 3%. Siemens dropped 3.1% after it agreed to buy Diagnostics Products Corp. for $1.86 billion. Car maker DaimlerChrysler dropped 3.9% after its Q1 profit rose just 4% on charges and disappointing results at its Mercedes division. Averages closed off lows supported by subsiding U.S. interest rate worries. The German DAX 30 dropped 0.6%, the French CAC 40 lost 0.7%, and London FTSE 100 declined 0.7%.

Crude oil prices declined on easing gasoline supply concerns. Light sweet crude June delivery fell 88 cents to $71.05 a barrel. London Brent dropped $1.05 to $71.04. European gold prices recovered from the drop after China raised its interest rates. In London gold traded at $641.25 per troy ounce, up from $638.90. In Zurich the precious metal rose to $639.15 from $637.85. Silver climbed to $12.90 from $12.70. The U.S. dollar further declined. The euro traded at $1.2537, up from $1.2453. The dollar bought 114.02 yen, up from 114.70. The British pound was quoted at $1.8034, up from $1.7851.


[R]11:30AM Earnings are inflation worries are back in focus.[/R]
Market traded down and up in the early hours of trading as inflation and earnings jumped back in the forefront. The Fed Chairman gave a standard testimony to the Congress. More than 250 companies are releasing the earnings today and approximately 100 companies are conducting earnings call this morning. Of the notable movers, Rockwell Automation, Navteq, Pulte Home, NCR, marathon Oil and Exxon Mobil and Harrah’s are dominating the trading.

Navteq ((NVT)) declined 17% on earnings of 17 cents vs. 18 cents a year ago on 17% rise in earnings. Rockwell Automation ((ROK)) reported earnings of 81 cents vs. 79 cents a year ago. Stock declined 4% but had run up to $79 earlier before the earnings. Pulte Homes ((PHM)) reported first quarter earnings of $1.01 vs. 83 cents a year ago. The company guided second quarter earnings lower to $1.10 and $1.00 below $1.33 analyst estimates. Pulte traded 3% lower. NCR ((NCR)) profit rose to 22 cents vs. 16 cents a year ago on revenue decline of 4%. The stock lost 12%.


[R]10:30AM Sensex in India rebounded on domestic demand.[/R]
Sensex in India climbed 292.75 points or 2.5% to land at 11,938.53. The daily turnover on Bombay Stock Exchange was recorded at $1.2 billion, slightly lower than yesterday. Maruti Udyog put on 6.6% to Rs 924.90 on surprisingly good Q4 results. A substantial 1.2 million shares were traded in the counter on BSE. Maruti reported 39% rise in fourth quarter profit to $72 million. Maruti’s results lifted rival car maker Tata Motors, up 3.6% to Rs 950.75. Bajaj Auto advanced 4% to Rs 2,950 and Hero Honda rose nearly 3% to Rs 850.

MTNL advanced nearly 7% to Rs 216.40 after it was announced by the company that it has decided to form a new entity to deal with its real estate assets in a bid to revive its falling bottomline. MTNL posted 56.6% drop in Q4 net profit to Rs 140.27 crore (Rs 323.26 crore). Income shed 3.8% to Rs 1,594.51 crore (Rs 1657.61 crore). The stock advanced on heavy volume of 45.3 lakh shares on BSE. Cipla gained nearly 6% to Rs 262.20. Total of 1.4 million shares were traded. The company posted 80.6% jump in Q4 net profit to $40 million. Bargain hunters bid up software export companies with Wipro rising 4.5%, Infosys gaining 2.6% and Satyam adding 1.4%. Cement stocks regained strength after falling this week. UltraTech Cement rose 10%, ACC added 4.5% and Grasim advanced 3.5%.


[R] 9:45AM Stocks opened in the negative.[/R]
U.S. stocks opened lower, in line with futures predictions, with averages losing ground after yesterday’s advance. The market weakness was largely contributed by disappointing earnings and China''s decision to raise interest rates. The news fueled worries that global demand and corporate profits could slow. Exxon Mobil came under pressure after reporting Q1 earnings and revenue that fell short of analyst estimates. The loss from the oil giant and the continuous drop in the price of oil led to weakness in the oil sector.
Networking stocks reversed from gains Wednesday and moved to the downside, with Alcatel ((ALA)) helping to lead the sector lower after reporting a Q1 profit that fell year-over-year. In the opening minutes, the Dow Jones industrials fell 46.99 points to 11,307.50, the Nasdaq Composite index declined 13.26 to 2,320.37 and the S&P 500 dropped 5.23 points to 1,300.18.

[R]Initial jobless claims climbed over expectations.[/R]
Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended April 22. The report showed that jobless claims rose much more than economists had been expecting. The report showed that jobless claims rose to 315,000 from the previous week''s revised figure of 304,000. Economists had expected claims to edge up to 305,000 compared to the 303,000 originally reported for the previous week. The less volatile 4-week moving average also increased, rising to 308,500 from the previous week''s revised average of 305,750. The increase comes after the average moved lower for four consecutive weeks. The report also showed that continuing claims in the week ended April 15 rose to 2.449 million from the preceding week''s revised level of 2.427 million.


[R]9:00 AM Stock futures indicated a negative market opening.[/R]
U.S. stock futures pointed to a sharply lower start, following the announcement that China raised its interest rates to 5.85%. Market sentiment was deeply hurt as the news came at a time when market seems worried about further interest rates increases, awaiting the Federal Reserve Chairman Ben Bernanke testimony before Congress about the U.S. economic outlook. A number of disappointing earnings from major companies also generated negative sentiment. Oil giant Exxon Mobil ((XOM)) reported Q1 net income rise of $8.4 billion or $1.37 per share from $7.86 billion or $1.22 per share last year, but came below analyst estimates of $1.46 per share. Phelps Dodge ((PD)) and Lucent ((LU)) also released quarterly declines. Dow component Microsoft ((MSFT)) is also due to release its quarterly results after market close. The software giant is expected to post income growth of 33 cents a share from 28 cents a year ago. Dow Jones futures were recently down 44 points, S&P 500 futures dropped 5.8 points, and Nasdaq 100 futures fell 7.5 points.

Crude oil prices declined on easing domestic supply concerns, although worries about Iran’s nuclear program weighed. Light sweet crude June delivery fell 64 cents to $71.29 a barrel. London Brent dropped 78 cents to $71.31. Gold prices sharply dropped after China raised its interest rates, raising concerns about lower demand. Gold traded at $631.70 per troy ounce from $637.50. The U.S. dollar was steady ahead of Ben Bernanke’s testimony before Congress. The euro traded at $1.2439, down from $1.2451. The dollar bought 114.70 yen, up from 114.69. The British pound was quoted at $1.7846, up from $1.7841.

Terra Industries Inc, ((TRA)), nitrogen and methanol producer, reported a Q1 net loss of 27 cents a share, down from a profit of 3 cents a share in the year-ago period due to revenue decline. The company added Q1 was more difficult and less active than expected but that it expects a better Q2. The company missed analysts’ forecasts for earnings of 7 cents a share.

AutoNation Inc., ((AN)), automotive products retailer, reported Q1 earnings from continuing operations of 37 cents a share, up from a profit of 33 cents a share a year-ago. Q1 results include a charge of a penny per share from stock option expensing. Revenue advanced 4% in Q1. The company met analyst views for a profit of 37 cents a share.

Kellogg Co, ((K)), cereal and packed-foods maker, reported that Q1 income advanced to 68 cents a share, up from 61 cents a year earlier. If not for stock-option expense, earnings would have been 71 cents a share. Sales rose to $2.73 billion from $2.57 billion in Q1 last year. The company beat analysts'' estimates of 63 cents a share.

Reynolds American, ((RAI)), tobacco company, reported Q1 earnings of $2.34 a share, up from $1.90 a share in the year-ago period. If not for non-recurring items, earnings would have been $1.89 a share, topping analyst estimate for earnings of $1.87 a share. The company affirmed its expectations for 2006 earnings of $8 to $8.40 a share.

OfficeMax Inc, ((OMX)), office products retailer, reported Q1 net earnings loss of 37 cents a share, down from a loss of 7 cents a share a year-ago. If not for special items, such as charges related to restructuring activities, the company would have posted earnings of 77 cents a share. Sales in Q1 advanced to $2.42 billion from $2.32 billion in the same period a year ago. Same-store sales were up 1.2%. If not for the charges, the company would have topped analysts’ estimate for a profit of 33 cents a share.

Janus Capital Group Inc., ((JNS)), asset manager, reported Q1 net income came to 17 cents a share, up from 9 cents in the year-ago quarter on revenue growth, matching analysts expectations for earnings of 17 cents a share.

Asbury Automotive Gorup Inc, ((ABG)), automobile retailer, reported Q1 earnings of 37 cents a share, up from 29 cents a share in the year-ago period. If not for non-recurring items, earnings would have risen to 43 cents a share from 37 cents a share. Revenue advanced 8% on new vehicle retail revenue rising 7% and used vehicle retail revenue increasing 13%. Same-store retail revenue advanced 6%. The company beat analysts’ expectations by a penny.

Coca-Cola Enterprises, ((CCE)), soda distributor, reported Q1 earnings of 3 cents a share, down from a profit of 10 cents a share a year-ago despite 3% revenue growth. Items, such as restructuring charges aside, the company earned 9 cents a share in Q1, in line with analyst estimate of analysts.

Rockwell Automation Inc, ((ROK)), maker of automation and control systems, reported that Q2 net income dropped to $146.5 million, or 81 cents a share, from $150 million, or 79 cents a share in the year-ago period, but in Q2 there were more outstanding shares. The company added its Q2 net income included 2 cents a share charge for legal matters. The company beat analysts’ forecasts for earnings of 75 cents a share.

Timken Co., ((TKR)), bearings manufacturer, reported that Q1 net income increased 13% to 70 cents a share, from 63 cents a share in the year-earlier period on revenue growth. Items not taken into account, net income advanced to 71 cents a share from 64 cents a share, topping analysts’ forecasts for earnings of 68 cents a share.


[R]8:15AM European averages dropped at mid-day.[/R]
European markets sharply declined at midday, reflecting weaker commodity and energy stocks, mixed earnings reports and deal talk involving companies like Siemens, Alcatel, and France Telecom. Metals prices moved lower after China lifted its base interest rate to 5.85%. Major mining companies like Rio Tinto and BHP Billiton sent the resource sector down 4%, while oil and gas giants Royal Dutch Shell and BP helped the energy sector down 2%. Alcatel fell 5.9% on lower profit, while Siemens dropped 3.1% after it agreed to buy Diagnostics Products Corp. for $1.86 billion. The German DAX 30 dropped 0.7%, the French CAC 40 lost 0.9%, and London FTSE 100 declined 0.8%.


[R]7:45AM Asia markets closed mixed.[/R]
Asian-Pacific benchmarks finished mixed. The Nikkei advanced on optimism about strong corporate earnings outlook, bolstered by upbeat quarterly results from Japanese companies and continuously falling oil prices. The index rose 0.3% to 17,114.54, supported by blue-chip automakers. Honda Motor reported record sales and profits to advance 5.3%, Nissan Motor, up 2.9%, and Toyota Motor, up 0.5%. Taiwan Weighted index reversed from earlier gains to close down 0.5% on profit taking in tech stocks which offset gains in financial and other companies. Hong Kong’s Hang Seng closed higher by 0.4%, boosted by property stocks. South Korea’s Kospi ended flat, but hit a new closing high.