U.S. Recovery Gathers Momentum

Arthi Gupta
27 Jan, 2012
New York City

The U.S. economy gathered steam and expanded at 2.8% annual rate in fourth quarter after growing at 1.8% in the third. Eastman Chemical agreed to acquire Solutia for $4.7 billion. Ford quarterly net soared and reported annual profit for third year in a row.

[R]10:35 AM New York – The U.S. economy gathered steam and expanded at 2.8% annual rate in fourth quarter after growing at 1.8% in the third. Eastman Chemical agreed to acquire Solutia for $4.7 billion. Ford quarterly net soared and reported annual profit for third year in a row.[/R]

U.S. indexes advanced ahead of fourth quarter GDP data and Ford Motor reported its third annual profit in a row.

European markets traded sideways as talks continue between Greece and its private bondholders but two sides remain apart and Italy sold €11 billion in bills today, meeting its target.

European leaders are increasingly facing the possibility that Greece will overshoot its deficit and debt targets and economy may shrink more than expected.

Greek economy is expected to shrink 6% in 2011 and fall another 5% in 2012 and government debt to GDP may jump more than 160% in the current year as tax collection lags. The Greek lawmakers are resisting the reform measures that will speed up the opening up of the economy and increase mobility in the labor force.

The Institute of International Finance, which represents private-sector holders of Greek bonds, has offered to accept a 70% haircut on its debt, according to remarks from Deutsche Bank chief executive officer Josef Ackermann told German television N-TV in an interview broadcast today.

Italy sold €11 billion of Treasury bills today as borrowing costs slumped from the previous sale.

The Italian Treasury sold €8 billion of 182-day bills at an average yield of 1.969%, down from 3.251% at the last auction of similar-maturity securities on December 28. The bid-to-cover ratio declined to 1.35, from 1.69 last month.

Asian markets edged higher.

Japan''s core consumer price index declined 0.1% from a year ago in December, following the 0.2% fall in November.

Separately, a report showed that retail sales in Japan rose 2.5% annually in December.

Eastman to Acquire Solutia

Eastman Chemical agreed to acquire Solutia, a global leader in performance materials and specialty chemicals.

Under the terms of the agreement, Solutia stockholders will receive $22 a share in cash and 0.12 shares of Eastman common stock for each share of Solutia common stock that values the company at $27.65 a share, representing 42% premium and total value of $4.7 billion.

Earnings Review

Amgen, Inc. ((AMGN)), the biotechnology medicines company reported fourth quarter total revenue increased 3% to $3.97 million from $3.84 million in the fourth quarter of 2010. Net earnings in the quarter fell 9% to $934 million compared to net earnings of $1.02 billion last year. However, on a per share basis, earnings for the quarter were unchanged at $1.08, reflecting a lower share count.

For the full year 2011, total revenue increased 4% to $15.58 million from $15.05 million in 2010. Net income for the period fell 26% to $3.68 million or $4.04 per diluted share from $4.62 or $4.79 per share in 2010.

Ford Motor Company ((F)), the auto maker said fourth quarter revenues climbed 6.5% to $34.6 billion from $32.5 billion in the prior year. Net income in the quarter soared to $13.6 billion, or $3.40 per diluted share compared with net income of $190 million, or 5 cents per share, a year earlier.

For the full year, revenue increased 7% to $136.3 billion and net income more than doubled to $20.2 billion, or $4.94 per share from $3.28 per share, from a year ago.

Samsung Electronics Co., Ltd., the South Korean conglomerate reported fourth quarter total sales rose 13% to 47.30 trillion won from last 41.87 trillion won year. Net profit in the quarter increased 17% to 4.0 trillion won compared to net profit of 3.42 trillion won in the prior-year quarter.

The Chubb Corporation ((CB)), the property and casualty insurance company reported net income in the fourth quarter declined 27% to $452 million or $1.60 per diluted share compared to net income of $620 million or $2.02 per share in the fourth quarter of 2010. Net written premiums for the fourth quarter increased 4% to $3.0 billion from $2.9 billion.

For fiscal year 2011, net income rose 23% to $1.7 billion or $5.76 a diluted share compared to net income of $2.2 billion or $6.76 per share in fiscal year 2010. Net written premiums in 2011 increased 5% to $11.8 billion from $11.2 billion in 2010.

The Procter & Gamble Company ((PG)), the of consumer packaged goods maker reported second quarter net sales increased 4% to $22.13 billion from $21.35 billion in the comparable period. Net earnings in the quarter plunged 49% to $1.69 billion, or 57 cents per diluted share compared to net earnings of $3.33 billion, or $1.11 per share, a year earlier.