Circuit City Swings to Profit

Elena
19 Jun, 2006
New York City

Stocks opened higher Monday as news of a joint venture between Nokia Corp. and Siemens AG gave the market momentum to extend last-week gains. Nokia jumped 71 cents to $20.68 and Siemens surged $6.02 to $85.82. Circuit City Stores Inc. swung to a profit from a year-ago loss, helped by store improvements and strong sales of flat-panel televisions. The company said net sales advanced 17.5%, while same-store sales advanced 14.6%.

[R]9:45AM Stocks opened in the positive.[/R]
Stocks opened higher Monday, with the major averages moving back to the upside after ending Friday's trading in negative territory. The early rise was largely contributable to gains by telecommunications as Nokia ((NOK)) helped to lead the sector higher, moving up on news that the company reached an agreement with Siemens ((SI)) to merge their telecommunications equipment businesses. Nokia jumped 71 cents to $20.68 and Siemens surged $6.02 to $85.82. The semiconductor sector also showed strength, with Intel ((INTC)) posting a notable gain following an upgrade by UBS. Some strength was visible in the retail sector, helped by Circuit City ((CC)) which rose 2% after reporting better-than-expected Q1 results. The market also benefited from strength in the brokerage sector. At the same time, the gold sector declined as the price of the precious metal moved down $8.20 to $573.50 an ounce. A decrease by the price of oil contributed to weakness in the energy sector. The Philadelphia Oil Service Index fell 1.4%. Utilities stocks were also weak, with AES ((AES)), Williams ((WMB)), and TXU ((TXU)) posting notable losses. In the first hour of trading, the Dow added 32.42, or 0.29%. The Standard & Poor's 500 index was up 2.13, or 0.17%, and the Nasdaq composite index rose 0.98, or 0.05%. Bonds extended last week's decline, with the yield on the 10-year Treasury note rising to 5.14% from 5.13% late Friday.


[R]9:00AM Stock futures indicated a higher opening on brokerage upgrade of Intel.[/R]
Stock futures moved upward, lifted by a brokerage upgrade of Intel Corp. and the announcement of a joint venture between Nokia and Siemens. UBS raised its rating on semiconductor maker Intel Corp. ((INTC)) to ‘buy’ from ‘neutral’. The brokerage raised its price target on the stock to $23 from $21. Intel shares rose 1.2% to $18.52 on Inet in low volume. Tech shares were supported by news that Nokia and Siemens agreed to combine their telecommunications equipment businesses to create one of the biggest players in the industry. U.S.-traded shares of Siemens were up 7.9% to $86.12, while Nokia''s stock was up 2.9% to $20.55 on the Inet electronic brokerage system. S&P 500 futures were up 3.9 points, above fair value. Dow Jones industrial average futures rose 30 points, and Nasdaq 100 futures gained 7.25 points.

Circuit City Stores Inc, ((CC)), home electronics retailer, reversed to a Q1 net profit of 4 cents a share, up from a year-ago loss of 7 cents a share and backed its sales and profit forecast for the year. The company said net sales advanced 17.5%, while same-store sales advanced 14.6%. Domestic segment Web-originated sales advanced 85%. Gross profit margin slumped 57 basis points. The company beat analysts extectation for earnings of 1 cent a share.

CarMax, ((KMX)), used car retailer, reported Q1 earnings advanced to 53 cents a share, up from 35 cents a share a year-ago. If not for non-recurring items, including costs for stock-based compensation and a benefit for its auto finance unit, earnings would have been 54 cents a share. Revenue grew 19%, while same-store sales advanced 14%. The company topped analysts expectations for earnings of 38 cents a share.


[R]8:00AM Nokia and Siemens plan to combine their mobile-network operations.[/R]
Nokia Corp. and Siemens AG announced Monday plans to combine their mobile-network operations to create a joint venture with annual revenue of about $20 billion. This move will enable them to compete with market leader Ericsson AB which is the top maker and seller of the network equipment used by wireless providers to send phone calls, downloads and data to and from cell phones and other devices. The 50-50 joint venture will be comprised of Nokia''s network business group and Siemens'' carrier-related operations, creating estimated synergies of 1.5 billion euros ($1.9 billion) by 2010.

The joint venture will be called Nokia Siemens Networks and will have some 60,000 employees. Simon Beresford-Wylie, chief of Nokia''s network operations, will head the new company, while its chief financial officer will be Peter Schoenhofer from Siemens. It was expected to be finalized by the end of the year, pending regulatory approval, and both companies said that between 10% and 15% of staff positions, or about 9,000 jobs, would likely be cut over the next four years. Shares of Siemens surged 8.2% in Frankfurt to 67.97 euros ($85.98), while Nokia was up nearly 3% to 16.11 euros ($20.38) in Helsinki.


[R]7:30 AM Asian stocks mostly decline on China’s central bank move.[/R]
Asian shares closed broadly lower. The Nikkei 225 Index fell 0.13% to 14860.35. On Friday, the index jumped 2.82%, ending a volatile week on a positive note. Traders sold electronics stocks, metals, banking and brokerage issues to make profit after their recent gains. Banks and exporters led the decliners in Japan. Mitsubishi UFJ Financial Group lost 2.01%. Sony shed 1.62%, while videogame rival Nintendo declined 1.22%. Sumitomo Metal Mining was off 1.35% and Daiwa Securities Group dropped 2.72%. China''s shares finished up for the third session in a row, powered by CAMC Engineering''s impressive stock debut. The benchmark Shanghai Composite Index advanced 0.8% to 1586.29 after losing nearly 9% last week on speculation of tightening measures. Hong Kong’s Hang Seng Index declined 0.47% to 15768.86 and in South Korean, shares settled down on profit-taking after Friday''s 3.5% rally, with concerns about a possible missile test by North Korea damaging sentiment. The Kospi Index dropped 0.8% to1251.67. banks and technology stocks led the decliners. Kookmin Bank shed 2.7% after advancing 3.7% on Friday. Its rival, Shinhan Financial Group, closed down 0.6%. Taiwan shares bucked the trend, led by food companies on hopes a rising Chinese yuan may support their earnings. The Taipei Index advanced 0.1% to 6583.04.


[R]6:30AM European bourses buoyed by Nokia and Siemens merger deal.[/R]
European stocks were higher in early trade on Monday. The FTSE 100 in London climbed 1.1% to 5,658.1, the Xetra Dax in Frankfurt was up 1.5% to 5,458.39 and the CAC-40 in Paris gained 4,751.03. In other news from the corporate front, Vinci was the worst faller on the Eurofirst 300, losing 2.7%, after Veolia Environnement, the French utility, abandoned its plan for a merger with the French construction and concessions group. Veolia, was up 4.1%, yielded to investors’ worried over a costly bid battle, saying conditions did not exist for a friendly deal.

Oil prices declined Monday, but steadied at the $69 level amid worries over Iran''s nuclear ambitions, and how that might impact oil supplies. Light, sweet crude for July delivery dropped 37 cents to $69.51 a barrel. Gold bullion opened Monday at a bid price of $570.60 a troy ounce, down from $573.50 late Friday. The euro slipped against the dollar on Monday on data posted late last week showing the U.S. trade deficit narrowed for the first three months of the year. The euro bought $1.2597, down from $1.2635 in New York on Friday. The British pound also slipped to $1.8445 from $1.8503 at the end of last week. The dollar also rose against the Japanese currency, purchasing 115.56 yen, up from 115.09.