U.S. Indexes Struggle; Flat Earnings at Time Warner, CVS, Ralph Lauren

Arthi Gupta
08 Feb, 2012
New York City

The U.S. indexes traded higher on the hopes that Greek negotiations will end as political parties end their differences. U.S. mortgage applications rose 7.5% last week. CVS Caremark, Ralph Lauren and Time Warner reported flat income growth and Sprint Nextel loss widened.

[R]9:35 AM New York – The U.S. indexes traded higher on the hopes that Greek negotiations will end as political parties end their differences. U.S. mortgage applications rose 7.5% last week. CVS Caremark, Ralph Lauren and Time Warner reported flat income growth and Sprint Nextel loss widened.[/R]

U.S. indexes and the European financial markets and the euro edged higher in a cautious trading on the hopes a resolution to the Greek debt restructuring talks. However, Greece may need larger than the €130 billion in bailout.

The difficult discussions are fraught with disagreements in how to reform labor markets and how much debt to be trimmed from the total. The European Central Bank is adamantly opposed to the pressures from the International Monetary Fund and Greece to participate in debt swap.

The ECB holds €55 billion of Greek bonds and in addition holds €100 billion of bonds from Portugal, Spain and Italy.

However, the situation of Greece is deteriorating and the value added tax revenues in January declined 18% from a year ago and the privatization revenue is expected to be half of the estimated €9.3 billion.

Greek Prime Minister Lucas Papademos is expected to meet leaders of three parties that are supporting his interim government to finalize a draft agreement agreed with the international lenders.

Germany auctioned €3.293 billion of 5-year bonds at lower borrowing costs but fell short of €4 billion target.

Nokia plans to cut 4,000 manufacturing jobs in Europe and Mexico as it shifts manufacturing of smartphones to Asia.

U.S. Mortgage Applications Up

The Mortgage Bankers Association''s benchmark index of mortgage applications rose 7.5% in the week ending February, following a drop of 2.9%.

The increase was driven by a 9.4% rise in refinancing activity, as fixed 30-year mortgage rates averaged 4.05%, down from 4.09% the week before.

Earnings Review

CVS Caremark Corporation ((CVS)), the pharmacy healthcare provider reported fourth quarter net revenues grew 15.2% to $28.32 billion from $24.59 billion in the year-ago period. Net income in the quarter increased 3% to $1.06 billion or 81 cents per diluted share compared to net income of $1.03 billion or 75 cents per share in the year-ago period.

Net revenues for the year grew 11.8% to $107.10 billion from $95.78 billion last year. For fiscal year 2011, net income edged up 1.7% to $3.49 billion or $2.57 per share from $3.43 billion or $2.49 per share last year.

Ralph Lauren Corp. ((RL)), the luxury clothing and goods company reported third quarter revenues advanced 16.8% to $1.81 billion from $1.55 billion in the prior year. Net income in the quarter climbed 0.6% to $169 million or $1.78 per share compared to net income of $168 million or $1.72 per share in the prior year.

Sprint Nextel Corporation ((S)), the telecom services provider reported fourth quarter net operating revenues grew 5% to $8.72 billion from $8.30 billion in the prior year. Net loss in the quarter widened 40% to $1.30 billion or 43 cents per diluted share compared to net loss of $929 million or 31 cents per share a year earlier.

Time Warner Inc. ((TWX)), the media and entertainment company reported fourth quarter revenues rose 5% to $8.19 billion from $7.81 billion in the same quarter last year. Net income in the quarter increased 0.5% to $773 million or 76 cents per diluted share compared to net income of $769 million or 68 cents per share reported last year.

For the full year 2011, revenues increased 8% to $28.97 billion. Net income for the period increased 12% to $2.89 billion or $2.71 per share from $2.58 billion or $2.25 per share in the prior year.