Earnings In View

123jump.com Staff
17 Jul, 2006
New York City

After falling for three days with a nearly 3% decline in popular averages last week, market managed to stabilize. Earnings brought a sharp focus to Citigroup, McDonalds, Commerce Bancorp, Eaton Corp. and Harley Davidson. The companies are reporting healthy gains in earnings on more than 5% to 10% rise in sales. Citigroup reported second-quarter earnings of $1.05 per share. Asian and European markets closed lower. Gold fell $16 and oil dropped $1.73 to $75.30 per barrel.

[R]4:30PM Earnings drag market focus back to basics.[/R]

-Nasdaq closed up 0.37 points, Dow up 8.01 and S&P 500 down 1.71.
-Yield on 10-year bond closed at 5.075% 30-year bond closed at 5.113%.
-Crude oil down $1.73 to closed at $75.30 per barrel.
-Gold traded lower $16.10 per ounce to close at $651.90.

-Asian Markets closed sharply lower, led by 3.1% decline in India and near 2% drop in Taiwan, Singapore. South Korea and Japan were closed.

-European Markets closed lower led by 0.7% decline in France. Norway lost 1.8% on lower oil and South Africa lost 2.0% on lower gold.

-Latin American Markets led by a decline of more than 1% in the region. Mexico closed higher by 0.6%.

Corporate earnings and falling oil dragged market focus back to basics. Earnings from McDonald’s, Citigroup, Harley Davidson, Eaton Corp, W. Grainger, Commerce Bancorp, Mattel, Marshall & Ilsley showed a rising trend of earnings. In Europe Philips and Novartis reported earnings. More than 350 companies are scheduled to release earnings this week, including Microsoft, Coca-Cola, Johnson & Johnson, Merrill Lynch, New York Times, Wells Fargo and Yahoo.

Citigroup ((C)) reported second quarter earnings of $1.05 or $5.27 billion on revenue rise of 10% to $22.2 billion. The company stock $1.18 lower to close at $46.40. McDonald’s ((MCD)) reported second quarter earnings of 67 cents vs. 42 cents a year ago. The company also reported 10 cents gain from the sale of Chipotle Mexican Grill. The company stock closed higher $1.48 to close at $34.72. Harley Davidson ((HDI)) reported second quarter earnings of 91 cents vs. 84 cents on revenue of $1.38 billion vs. $1.33 billion a year ago. The company sold 125,000 bikes around the world, 10% more than a year ago. U.S. sales rose 18.1% and international sales rose 8.6%.

Market averages traded directionless for the most part of the day. Fall in oil helped averages to recover most of the lost ground in the early trading. In Asian trading most markets closed lower. Japan and South Korea were closed due to a holiday. India lost 3.6% on the weakness in general market and lack of buying. Baja Auto reported 27% rise in earnings but missed the investor forecast of 44% rise in earnings. Taiwan and Hong Kong closed lower. Semiconductor stocks in Taiwan sold-off. Taiwan Semiconductor Manufacturing ((TSM)) and United Microelectronics fell 2.5% at close.

In European trading major averages closed lower. Philips Electronics gained 2.9% on $1.9 billion share buyback and earnings. The company reported earnings decline of 69% after one time charge or 30% before the one-time charge. The company reported earnings of $380 million. French supermarket Casino-Guichard added 1.9% on the news that it sold its Polish operation for $1.2 billion. In the U.K. trading, gaming stocks fell on the news that the U.S. authorities detained CEO of BetOnSports. The company stock fell 17% and other online gaming company stocks fell in sympathy. PartyGaming fell 5% and Sportingbet fell 6%.


[R]12:30PM European markets closed slightly lower.[/R]
European markets closed below the flat line on continuing worries over the escalating conflict in the Middle East. However, positive opening on Wall Street due to strong same-store sales for MacDonald’s and a decline in oil prices helped limit losses. Technology stocks also provided help, supported by 2.9% gain for Philips Electronics after the company announced a $1.9 billion share buyback. Among leading losers were miner Rio Tinto, down 1.8% and clothing retailer Hennes& Mauritz which fell 1% on disappointing same-store sales. The German DAX 30 edged down 0.1%, the French CAC 40 dropped 0.6%, and London FTSE 100 fell 0.1%.

Oil prices retreated from record highs, reflecting attempts to stop the escalating violent conflict in the Middle East. Light crude August delivery fell $1.13 to $75.90 a barrel. London Brent lost 84 cents to $76.74. The dollar traded higher versus major currencies. The euro traded at $1.2529, down from $1.2647. The dollar bought 117.15 yen, up from 116.21. The British pound stood at $1.8196, down from $1.8383. European gold prices moved lower. In London the precious metal traded at $649.30, down from $665.80 per ounce. In Zurich gold traded at $648.05, down from $666.55. Silver closed at $11.03, down from $11.59.


[R]11:30AM Stock markets declined on weak oil and gold stocks.[/R]
Stock averages reversed from an earlier strength as a notable decline for Citigroup dragged banking stocks lower and lower crude oil prices pressured major oil companies. Dow component Citigroup ((C)) dropped 2.4% after the company reported Q2 earnings and revenue that came in below analyst estimates. Oil prices retreated 73 cents to $76.30 a barrel, generating some selling pressure in morning trading. Oil service stocks posted significant weakness, sending the Philadelphia Oil Service Index down 2.5% and the Amex Oil Index down 1.5%. Losses by gold stocks also helped the market move lower. The losses came amid a significant decrease by the price of the precious metal, down $18.80 at $649.20 an ounce. Biotechnology stocks also came under pressure, with Biogen Idec ((BIIB)) and Celgene ((CELG)) turning in two of the sector's worst performances. Meanwhile, some strength was visible in the disk drive sector, boosted by a notable advance in the shares of Adaptec ((ADPT)) and M-Systems ((FLSH)). In late morning trading, the Dow Jones industrial average rose 20.14, or 0.19%. The Standard & Poor's 500 index fell 0.44, or 0.04%, and the Nasdaq composite index climbed 2.73, or 0.13%.


[R]10:30AM Sensex in Mumbai, India declined 3.17% on lack of buying and general weakness in Asian trading.[/R]
Rising oil price, weak Asian markets and declining trading volume in India kept the market averages falling at the opening in Mumbai trading. BSE index of 30 stocks opened weak. Mixed earnings from several companies did not encourage buyers. At close market lost 385 points or 3.17% to close at 10,343.80. Trading volume on Bombay Stock Exchange was recorded at rupees 1,739 crore ($400 million), one of the lowest for the year.

All thirty stocks in the Sensex index managed to close lower. Of the 2,432 shares traded, 655 rose, 1,713 declined and 64 were unchanged. Mid-cap and small-cap index on BSE declined 1.2%.

The earnings season is in full swing and most consumer and industrial companies are reporting solid gains.

Auto stocks declined on the earnings news from Bajaj Auto. The company reported first quarter earnings growth of 28% to rupees 266 crores from rupees 208 crores from a year ago. Sales for the company rose 37% to rupees 2,202 (or $500 million). The stock fell 2.5% to close at rupees 2,518 on the news. Local brokers had forecasted revenue rise of between 44% and 54% in the quarter.

With the news and rising oil prices dragged other stocks in the sector. Maruti Udyog lost 5.3% to close at rupees 753, Tata Motors dropped 5.85% to close at rupees 696 and Ashok Leyland dropped 5% to close at rupees 32. Mahindra & Mahindara lost 6% to close at rupees 551. Rising oil price in the international markets were worrying to the investors.

ICI India rose 3% on the news that the company is planning a share buy back worth rupees 125 crores at a share price below rupees 350. The stock closed at rupees at 303.

McDowell & Company reported solid quarterly results. The sales rose 63% in the quarter to rupees 533 crores and earnings rose whopping 234% to rupees 34.68 crores. The beer and liquor company stock gained 1% to close at rupees 498.

India Cement based in South India, lost 2.5% to close at rupees 180 on the earnings news. The company reported revenue rise of 27% and earnings growth of 2,000%. The company revenue was reported that at rupees 485 crores and earnings of rupees 112 crores. Deepak fertilizer rose 12% on earnings jump of 10% on revenue growth of 28%. The stock closed at rupees 77.85.

In other markets in Asian trading, Tokyo and South Korea were closed due to a local holiday, but in Hong Kong closed 0.5% and in Taiwan closed 2.7% lower.


[R]9:45AM Stocks edged up at opening on strong economic data.[/R]
Stocks opened modestly higher in early trading Monday as strong manufacturing data helped offset market jitters about the escalating fighting in the Middle East and a series of bland earnings reports, the latest from Citigroup ((C)). The Fed Reserve reported that industrial production rose 0.8% in June, far better than the 0.4% growth economists had expected. Despite the ongoing violence in Israel and Lebanon, oil prices moved down, with a barrel of light crude quoted at $76.25, down 78 cents, on the Nymex.

The decrease by the price of oil eased concerns about higher fuel costs, helping airline sector recover from recent decline and sending the Amex Airline Index up 0.7%. At the same time, energy stocks posted some weakness. The Philadelphia Oil Service Index fell 1.5%, while the Amex Oil Index was down 1%. Disk drive stocks moved notably to the upside in early trading, lifted by 7.7% gain for Adaptec ((ADPT)). The manufacturer of storage products and software gained after Morgan Keegan upgraded its rating on the stock to Outperform from Market Perform. Some early strength also emerged in the health insurance sector, with Sierra Health ((SIE)) and Coventry Health Care ((CVH)) posting notable gains. In the first hour of trading, the Dow Jones industrial average rose 28.34, or 0.26%.The Standard & Poor's 500 index added 0.81, or 0.07%, and the Nasdaq composite index climbed 6.88, or 0.34%.

[R]Industrial production rose more than expected.[/R]
Monday morning, the Federal Reserve released its report on industrial production and capacity utilization in the month of June. The report showed that production rose more than economists had been expecting. The report said that industrial production rose 0.8 percent in June following a 0.1 percent decrease in May. Economists had been expecting production to increase by a more modest 0.4 percent. The increase was partly due to a notable increase in output from mines, which rose 1.2 percent in June following a 0.3 increase in May. Output from utilities also increased, rising 0.7 percent in June after a 0.2 percent increase in May. The report also showed that manufacturing output increased 0.7 percent in June following a revised 0.1 percent increase in May. The originally reported showed that manufacturing output fell 0.1 percent in May. The Federal Reserve also said that capacity utilization increased to 82.4 percent in June from 81.8 percent in May. With the increase, the capacity utilization rate came in above economist estimates of 82.0 percent.


[R]9:00AM Stock futures pointed to a lower opening on geopolitical tension.[/R]
After a brief advance, U.S. stock futures moved to the downside, pointing to a lower market opening, as investors grew worried over the conflict in the Middle East. Earnings reports were pushed to the backseat, failing to provide a boost to the market.

Citigroup Inc. ((C)) the world's largest bank by market value, reported a profit in line with the analysts' estimates. The financial services institution posted Q2 profit growth of 4% to $5.27 billion, or $1.05 per share, up from $5.07 billion or 97 cents a share a year ago. Shares dipped 0.2%to $47.48 before the opening bell. Motorcycle maker Harley-Davidson Inc. ((HDI)) reported a 3% rise in quarterly earnings to $243.4 million or 91 cents per share versus $237.4 million, or 84 cents per share a year ago. Other companies due to report earnings Monday include Web search company Yahoo Inc. ((YHOO)) which will report after the market's close.

Shares of Apple Computer Inc. ((AAPL)) rose 1.6% to $51.46 before the opening bell on reports that that the stock could rebound over the next year as interest in the company's Macintosh computers picks up. Shares of General Motors Corp. ((GM)) could also be in focus on news that its board of directors will hold a conference on Monday to discuss a potential alliance with Renault SA and Nissan Motor Co. Standard & Poor's 500 futures were down 3.2 points, just slightly below fair value. Dow Jones industrial average futures were down 18 points, and Nasdaq 100 futures were down 1.75 points.

Commerce Bancorp Inc. ((CBP)), a regional bank, reported that its second-quarter earnings slightly advanced in spite of revenue growth as the low long-term interest rates tightened margins. Net income grew to $79.5 million from $79.4 million a year earlier. EPS declined to 41 cents from 46 cents a year ago, while the average shares outstanding number rose 9% percent to 193.8 million. Net interest income climbed 11% from last year to $318.9 due to an increase in the volume of interest-earning assets. Loans gained 34% to $14.1 billion from last year. The bank's service fees rose 33% driving the non-interest income up 24% from a year ago to $143 million.

Student Loan Corp. ((STU)), educational lender majority owned by Citigroup Inc., reported a 26% increase in its second-quarter profit from a year ago. Quarterly earnings rose to $101.8 million, or $5.09 per share, from $80.9 million, or $4.05 per share, in the year-ago period mostly thanks to a $42.3 million gain tied to the securitization of $2.2 billion in student loans, which was $13 million above the 2005 securitization. Most recent quarter results were also bolstered by other gains on loan sales, and fees and other income that surpassed the results from a year-ago comparable period though the gains were partially overshadowed by a $9.8 million reduction in floor income. Revenue in Q2 added 27% over last year’s results to $206.7 million, while net interest income declined 12% to $109.9 million hurt by the $16 million lower floor income.

Marshall & Ilsley Corp. ((MI)), bank operator, posted 1% higher second-quarter profit thanks to stronger interest income and revenue from asset management, mortgage banking and other services. Net income was $203.7 million, or 79 cents per share, versus a year-earlier profit of $183.7 million, or 79 cents per share. The average number of shares outstanding in the most recent quarter climbed to 258.3 million from 233.9 million last year. Net interest income advanced 19% from a year ago to $381.8 million, while non-interest income added 12% to $484.4 million. The company’s assets as of June 30th, 2006 amounted to $54.4 billion, up from $43.5 billion a year ago. Book value per share totaled $22.81 versus $18.76 a year ago.

Harley-Davidson Inc. ((HDI)), motorcycle maker, enjoyed double-digit increase of international sales and posted a 3% growth in second-quarter profit. Quarterly earnings totaled $243.4 million or 91 cents per share versus $237.4 million, or 84 cents per share a year ago. Revenue increased 3% from a year ago to $1.38 billion. The company’s domestic retail motorcycle sales surged 8.1%, while international sales climbed 17.3% in the quarter. Harley-Davidson's worldwide dealer network sold 125,000 motorcycles, up 10% from the prior-year comparable period.

Eaton Corp. ((ETN)), industrial products manufacturer, reported a 21% increase in its second-quarter profit due to better sales across the company’s segments. Quarterly earnings rose to $253 million, or $1.64 per share, from $209 million, or $1.37 per share a year ago. Excluding acquisition-related charges, adjusted income was $259 million or $1.68 per share vs. $214 million, or $1.40 per share in the prior-year period. Revenue rose 13% from a year ago to $3.19 billion. Third-quarter EPS are expected in a range between $1.50 and $1.60. Excluding charges for acquisition integration, adjusted net income is forecasted in a range of $1.55 and $1.65 per share. Eaton backed its full-year earnings guidance in a range between $5.90 and $6.20 per share. Adjusted earnings are seen between $6.10 and $6.40 per share. The company is also raising its quarterly dividend 11% percent to 39 cents per share.

Citigroup Inc. ((C)), financial services institution, reported Q2 profit growth of 4% helped by better corporate and investment banking revenue. Net income was $5.27 billion, or $1.05 per share, up from $5.07 billion or 97 cents a share a year ago. Revenue advanced 10% from a year earlier to $22.18 billion. Corporate and investment banking revenue jumped 31% to $6.76 billion and revenue from global wealth management climbed 19% to $2.5 billion. Revenue in the global consumer division grew 5% from a year ago to $12.6 billion. Revenue declined in the company's alternative investments and miscellaneous corporate category.

Despite the declining sales of its core brands, Mattel Inc. ((MAT)), the world's No. 1 toymaker, swung to a second-quarter profit helped by lower tax expenses. The company reported quarterly earnings of $37.4 million, or 10 cents per share versus a loss of $94 million, or 23 cents per share a year ago. The most recent results include tax benefits of about $6.2 million, or 2 cents per share, related to an audit settlement with a state tax authority. Revenue climbed 8% from a year earlier to $957.7 million. Worldwide gross sales for its Barbie brand dropped 1% and Hot Wheels declined 7% from a year ago.

The world's biggest fast-food restaurant chain McDonald's Corp. ((MCD)) second-quarter results benefited from a strong performance by its European business and growing demand for its breakfast offerings. U.S. same-store sales in June rose 5.2%, while the U.S. same-store sales for the second quarter were up 4.2% from a year ago. Global same-stores sales rose 5.5% and in Europe the company enjoyed to a same-stores sales increase of 4.5% in June partly driven by promotions related to the World Cup. Europe same-store sales for the most recent quarter grew 6.3%. Same-stores sales in the Asia/Pacific, Middle East and Africa segment advanced 8.8% in June bolstered by the solid results of Japan and Australia. Earnings for Q2 are expected at 67 cents per share, including a 10 cents per share gain tied to the sale of part of McDonald's stake in Mexican restaurant chain Chipotle Mexican Grill in that company's IPO.


[R]8:00AM Oil prices climbed on escalating Mideast conflict.[/R]
Crude oil prices further advanced on Monday, reflecting more geopolitical uncertainty in the market on escalating fighting between Israel and militants in Lebanon. The fighting follows persistent oil market anxieties about the West's nuclear standoff with Iran, threats of supply disruptions in Nigeria and the Gulf of Mexico hurricane season. Although the Mideast conflict had no direct effect on oil supplies, it pushed oil prices higher because it added more nervousness.

Light, sweet crude for August delivery gained 55 cents to $77.58 a barrel in Asian electronic trading on the Nymex, mid-afternoon in Singapore. September Brent crude futures on London's ICE Futures exchange gained 41 cents to $77.99 a barrel. Gasoline futures rose 1.01 cents to $2.335 a gallon Monday while heating oil prices added 1.4 cents to $2.09 a gallon. Natural gas prices fell 16.7 cents to $6.180 per 1,000 cubic feet.

Fighting between Israel and militants in Lebanon escalated over the weekend, raising fears of a possible full-blown war. British Prime Minister Tony Blair and U.N. Secretary-General Kofi Annan called Monday for the deployment of international forces to stop the bombardment of Israel from southern Lebanon. Their comments came a day after world leaders forged a unified response at their G-8 summit to the crisis in the Middle East, blaming Hezbollah and Hamas for the escalating violence and recognizing Israel's right to defend itself.