U.S. Wholesale Inventories Rise, Alcoa Earnings Disappoint

Maureen Salinas
10 Oct, 2012
New York City

U.S. indexes fell and wholesale inventories rose in August. Toshiba agreed to acquire Shaw Group''''s stake in Westinghouse for $1.60 billion and Cytec agreed to divest its coating resins business to Advent. Bain Capital agreed to buy Apex Tool for $1.6 billion.

[R]12:05 PM New York – U.S. indexes fell and wholesale inventories rose in August. Toshiba agreed to acquire Shaw Group''s stake in Westinghouse for $1.60 billion and Cytec agreed to divest its coating resins business to Advent. Bain Capital agreed to buy Apex Tool for $1.6 billion.[/R]

U.S. indexes dropped after Alcoa reported higher earnings but issued a weak outlook for the year and blamed uncertainty in China and in global markets.

At least 90 companies have issued or lowered current quarter earnings as of today and 20 companies have lifted the earnings views.

FedEx is targeting $1.7 billion in annual profit improvement the next three years. Separately, Chevron Corp. forecast earnings for the third quarter to be """"substantially lower"""" than the second quarter.

European indexes edged lower after the International Monetary Fund said in its latest assessment that risks to global financial stability have increased and revised higher the amount of assets banks may have to sell to complete the deleveraging process.

German Chancellor Angela Merkel met Greek Prime Minister Antonis Samaras yesterday in Athens and as labor union rioted on the streets. Chancellor Merkel urged Greece to stay in the currency union and implement the austerity measures demanded by the troika.

Asian indexes closed lower on global growth concerns with the Japanese stocks falling to a two-month low and South Korea said employment expanded.

U.S. Wholesale Inventories Rise

Wholesale inventories increased 0.5% in August following a downwardly revised 0.6% increase in July, according to a report released by the U.S. Commerce Department today.

Wholesale sales rose 0.9% in August after declining a revised 0.2% in July.

Toshiba to Acquire Shaw Group''s Stake in Westinghouse

Toshiba Corp., the Japanese electronics company agreed to buy Shaw Group Inc.''s 20% stake in nuclear power company Westinghouse Electric Co. for about 125 billion yen or $1.60 billion.

The purchase will increase Toshiba''s ownership of Westinghouse to 87% from the current 67%.

Cytec to Divest Coating Resins Business

Cytec Industries Inc. agreed to divest its coating and resins business to Advent International, a private equity firm for $1.03 billion plus assumed liabilities of $118 million bringing the total value to $1,150 million. The sale is expected to close in the first quarter 2013.

Danaher, Cooper to Sell Apex Tool Group

Danaher Corporation and Cooper Industries agreed to sell Apex Tool Group to Bain Capital for approximately $1.6 billion. Currently, Danaher and Cooper each maintain a 50% joint venture ownership interest in Apex.

Danaher expects the sale to generate after-tax net proceeds of approximately $650 million.

Earnings Review

Alcoa Inc. ((A)), the aluminum producer reported third quarter sales declined 9% to $5.83 billion compared with third quarter 2011, primarily due to a 17% and 20% annual respective decline in the realized metal price and realized alumina price.

Net loss in the quarter swung to $143 million or 13 cents per diluted share compared to net income of $172 million or 15 cents per share, in third quarter 2011.

Costco Wholesale Corporation ((COST)), the membership warehouses operator reported fourth quarter net sales rose 14% to $31.52 billion, from the prior year. Net income for the quarter climbed to $609 million or $1.39 per diluted share compared to $478 million or $1.08 per diluted share, during the year-ago quarter.

Net sales for the fiscal year climbed 12% to $97.06 billion, from the prior year. Net income for the full year increased to $1.71 billion or $3.89 per diluted share compared to $1.46 billion or $3.30 per diluted share last year.

FedEx Corporation ((FDX)), the cargo delivery company announced programs targeting annual profitability improvement of $1.7 billion during the next three years and reduce cost in its air express service segment.

Helen of Troy Limited ((HELE)), the personal care products maker reported second quarter net sales revenue increased 3.6% to $287.41 million, from the same period last year. Net income in the quarter fell to $22.97 million or 72 cents per diluted share compared with $23.59 million or 74 cents per share a year before.

Yum! Brands, Inc. ((YUM)), the restaurant chain reported third quarter revenues grew 9% to $3.57 billion from a year ago. Net income in the quarter rose 23% to $471 million or $1 per diluted share compared to $383 million or 80 cents per share last year.