U.S. Indexes Advance; Wal-Mart Net Falls 15%

Arthi Gupta
21 Feb, 2012
New York City

The U.S. indexes gained after European leaders approved the second bailout package for Greece. Canada-based Fortis agreed to acquire CH Energy for $1.5 billion. URS agreed to purchase Flint Energy Services for C$1.25 billion.

[R]9:35 AM New York – The U.S. indexes gained after European leaders approved the second bailout package for Greece. Canada-based Fortis agreed to acquire CH Energy for $1.5 billion. URS agreed to purchase Flint Energy Services for C$1.25 billion.[/R]

U.S. indexes traded higher after European leaders and bankers hammered out an agreement to release second bailout that will also lower its debt load under tough conditions. Earnings at Home Depot rose and Wal-Mart Stores declined.

European markets edged lower from a seven-month high after the euro zone ministers, the International Monetary Fund and the European Central Bank approved the second bailout but only after more than thirteen hours of negotiations.

The second bailout agreed first in October was derailed as Greece faltered in implementing its austerity measures and European politicians demanded stricter conditions.

The agreement calls for the release of €130 billion bailout in stages that will be monitored by a permanent committee and will have a priority in repaying debt over the general expenses.

The final agreement increased the loss to private bond holders to 53.5% of face value or the equivalent to 73.5% of overall loss.

Greece debt is expected to decline to 120.5% of its gross domestic product by 2020, from the current debt of nearly 160% largely with the help of lower interest rate on the newly exchanged bonds in which the ECB will also participate.

The debt-swap would have a coupon of 2% in 2014, rising to 3% between 2015 and 2020 and to 4.3% thereafter.

Greece may need more aid in the years after 2014 and lenders and politicians appeared to be prepared for it. Between 2015 and 2020, Greece may need additional loan of €50 billion.

The Spanish Treasury raised €2.5 billion from the sale of its 3- and 6-month Treasury Bills.

Asian markets traded lower and declined from the highs of the six months after the expected Greek bailout decision.

Fortis to Acquire CH Energy

Fortis Inc. agreed to acquire CH Energy Group, Inc. for $65 per common share in cash. The aggregate purchase price of the deal would be about $1.5 billion, including the assumption of approximately $500 million of debt on closing.

URS to Purchase Flint Energy Services

URS Corp. said on Monday that it has agreed to buy Flint Energy Services Ltd. for C$25 per share in cash, or C$1.25 billion, to expand its presence in fast growing segments of North American oil and gas industry, particularly in unconventional oil and gas extraction. URS will assume about C$225 million in Flint debt.

The per share purchase price represents a 68% premium to Flint''s closing stock price on Friday.

Ericsson to Buy BelAir Networks

LM Ericsson Telephone Co., the Swedish telecom equipment maker agreed to buy privately-held Canadian Wi-Fi company BelAir Networks. The terms of the transaction were not disclosed.

Earnings Review

Kraft Foods Inc. ((KFT)) fourth quarter net revenues climbed 6.6% to $14.69 billion from $13.77 billion a year earlier. Net earnings for the quarter rose 53.7% to $830 million or 47 cents per diluted share compared to net earnings of $540 million or 31 cents per share in the prior-year quarter.

Medtronic, Inc. ((MDT)), the medical technology company reported third quarter revenue grew 1.6% to $3.918 billion from $3.857 billion in the third quarter of fiscal year 2011. Net earnings for the quarter increased 1.2% to $935 million or 88 cents per diluted share compared to net earnings of $924 million or 86 cents per share in the previous year.

The Home Depot, Inc. ((HD)), the home improvement retailer reported fourth quarter net sales grew 5.9% to $16.01 billion from $15.13 billion in the same quarter last year. Net earnings in the quarter rose 31.9% to $774 million or 50 cents per diluted share compared to net earnings of $587 million or 36 cents per share in the previous year.

For the fiscal year, sales grew 3.5% to $70.4 billion from $68 billion a year earlier. The company''s annual net earnings increased 16.2% to $3.88 billion or $2.47 per share from $3.34 billion or $2.01 per share in the prior year.

Wal-Mart Stores, Inc. ((WMT)), the operator of retail stores reported fourth quarter net sales rose 5.8% to $122.3 billion from $115.6 billion in the same quarter last year. Net income in the quarter fell 15% to $5.16 billion or $1.50 per diluted share compared to net income of $6.06 billion, or $1.70 per share in the prior-year quarter.

Consolidated net sales for the full fiscal year were $443.9 billion, an increase of 5.9% over fiscal year 2011. For fiscal year 2012, net income rose 2.7% to $15.8 billion or $4.54 per diluted share from $15.4 billion or $4.18 per share last year.