Caterpillar Posts 38% Growth

Elena
21 Jul, 2006
New York City

Stocks dropped on significant weakness for tech stocks, dragged by five-year low for Dell due to disappointing earnings. The semiconductor sector was also weak as Broadcom, communications semiconductors maker, reported Q2 revenue in line with estimates but issued a disappointing Q3 forecast. Swedish telecom equipment maker Ericsson fell 1.7% after reporting weaker-than-expected Q2 sales. Caterpillar said Q2 earnings surged 38%, the strongest financial performance in four decades.

[R]11:30AM Stock markets turned to the downside.[/R]
Technology stocks showed significant weakness in morning trading, as a warning from Dell ((DELL)) outweighed better-than-expected quarterly results from Microsoft ((MSFT)) and Google ((GOOG)). Microsoft advanced 4.6%, helping to limit the downside for the Dow. The Amex Computer Hardware Index dropped 2.9%. Semiconductor stocks also moved to the downside, dragged by Advanced Micro Devices ((AMD)), down 13% and Broadcom ((BRCM)), down 10%. Some disk drive stocks came under pressure, with shares of Hutchinson Technology ((HTCH)), down 12.1% after the company reported Q3 earnings that fell sharply year-over-year. The airline sector declined, as an increase by the price of oil has renewed concerns about the impact of higher fuel costs. Some telecommunications, housing, and brokerage stocks also posted substantial losses. Among telecom stocks, Ericsson ((ERICY)) fell 1.7% after the company reported weaker-than-expected Q2 sales. In contrast, some utilities stocks moved to the upside, with NiSource ((NI)), PSEG ((PEG)), and Southern ((SO)) posting notable gains.


[R]10:30AM India’s Sensex declined on rate worries.[/R]
Sensex in India closed at 10,085.61, down 267 points in Friday’s trading. For the week the index lost 592 points or 5.5%. Volatility plagued the market during the week. Volatile metals, oil and global markets have impacted the trading. International investors have been selling stocks in India on the fears that the interest rates in the U.S. Domestic mutual funds sold on Friday on the fears that Reserve Bank of India may increase the rates in the coming week.

Construction company Larsen & Toubro (L&T) reported quarterly profit rise of 9.9% on revenue growth of 11.7%. The second quarter profit was bolstered by the boom in infrastructure spending from the Central and State governments. The company has benefited from the recent projects for national highway, water plants and project for oil refineries. The company has also formed a subsidiary in Kuwait for the local business. The stock closed at rupees 2,027, down 5% on the earnings news.

Tata Steel traded 1.8% down to close at rupees 478.25. The company reported 11% rise in revenue and 3.2% rise in profit in the first quarter. The stock traded down on a trading volume of 2.6 million shares.


[R]9:45AM Stocks opened mixed on earnings reports.[/R]
U.S. stocks made a mixed performance at opening due to rising oil prices and disappointing news from high-profile tech companies. The Dow and the S&P 500 moved modestly higher, while the Nasdaq dropped below the unchanged line, reflecting weakness in the tech sector. Crude futures rose Friday on the Mideast crisis and Bernanke’s comments that energy prices are to blame for inflationary pressures.

The losses by tech stocks came as a warning from Dell ((DELL)) offset better-than-expected quarterly results from Microsoft ((MSFT)) and Google ((GOOG)). The computer hardware sector reversed from solid gains Thursday on Apple’s profit and dropped 3.5% due to the earnings warning from Dell. The semiconductor sector also posted significant weakness, with Broadcom ((BRCM)) down 12% on Q2 revenue. The company said that an ongoing review of its equity awards delayed the release of its earnings. Shares of Advanced Micro Devices ((AMD)) dropped 10% as the chipmaker posted disappointing results. In the first hour of trading, the Dow Jones industrial average rose 16.97, or 0.16%. At the same time, the drug sector showed a modest advance, though Eli Lilly ((LLY)) edged down by about 1% on its quarterly results. The utility sector showed a modest gain as well. The Standard & Poor''s 500 index added 1.21, or 0.1%, while the Nasdaq composite index fell 6.84, or 0.34%.


[R]9:00AM Stock futures pointed to a flat opening on Dell warning.[/R]
Stock futures pointed to a flat market opening Friday morning as a profit warning by Dell Inc. outweighed stronger-than-expected quarterly results by Caterpillar Inc. Dell is the latest high-profile tech disappointment after Hewlett-Packard, Intel, and Yahoo.

In earlier trading the Nasdaq was moving higher on favorable results from Microsoft Corp. ((MSFT)), as the world''s largest software maker raised its full-year outlook on strong demand for Windows and said it planned a $40 billion share buyback. However, the tech-heavy average fell after the Dell ((DELL)) announcement. Shares of the personal computer maker dropped 12.3% in pre-market trading after warning that Q2 earnings and revenue would come below forecasts, citing ‘aggressive pricing’ in a slowing market. Dell expects to report Q2 earnings of 21 to 23 cents per share, below the expected 32 cents a share. That disappointing piece of news offset positive news for the market by Caterpillar ((CAT)). The shares of the heavy equipment maker rose 2.8% after reporting higher quarterly profit and lifted outlook for the full year. Also after the close Thursday, Google Inc. ((GOOG)) reported a quarterly profit above market expectations, sending its shares up 1%. The web search company said Q2 profit more than doubled as it expanded its leading share of the market for online-search advertising. Standard & Poor''s 500 futures were last up 0.50 point, even with fair value. Dow Jones industrial average futures were up 3 points, and Nasdaq 100 futures were down 6.75 points.

Broadcom ((BRCM)), communications semiconductors maker, reported second-quarter revenue in line with estimates but issued a disappointing third-quarter forecast. Revenue for the most recent quarter increased 56% to $941.1 million from last year''s $604.9 million. The management said it could not post additional results for the second quarter until equity reward reviews and audit procedures have ended and restated financial statements have been completed. Broadcom expects third-quarter revenue to be about $900 million on inventory corrections across half of the company’s divisions.

Caterpillar Inc. ((CAT)), heavy equipment maker, posted second-quarter earnings of $1.05 billion, or $1.52 a share vs. $760 million, or $1.08 a share a year earlier. Sales and revenue increased 13% to $10.61 billion from $9.36 billion a year earlier. Higher earnings were attributed to the better price realization and growing sales volumes, which were partially overshadowed by increasing core operating expenses. The company boosted its forecast for the year to earnings of $5.25 to $5.50 a share with sales and revenue climbing between 12% and 15% from an earlier guidance for earnings of $4.85 to $5.20 a share on sales and revenue increase of 10%.

Cognos ((COGN)) first-quarter earnings declined to $14.5 million, or 16 cents a share, from $20.4 million, or 22 cents a share, a year ago. Excluding non-recurring items, earnings would have been 16 cents a share. Revenue rose 8.5% from last year to $217 million, with license revenue climbing 3.6% to $73.7 million. The business development software firm sees second-quarter adjusted earnings at 22 to 26 cents a share and revenue at $220 million to $228 million.

Eli Lilly and Co. ((LLY)) reported second-quarter earnings of $822 million, or 76 cents a share, versus a loss of $252 million, or 23 cents a share last year. The year-earlier results include a product liability expense of $1.073 billion, or 90 cents a share. Sales added 5% in the latest quarter to $3.87 billion helped by the company’s new products such as the depression treatment Cymbalta.

Summit Financial Group Inc. ((SMFF)), bank holding company, posted second-quarter net income of $2.6 million, or 37 cents a share vs. $3.1 million, or 43 cents a year ago. Loan originations of $67.1 million slid 19.7% from the year-earlier period, while deposits at the end of the most recent quarter rose 34.8% from last year.

Microsoft Corp. ((MSFT)), the world''s largest software company, posted 24% lower fourth-quarter profit due to legal charges and higher expenses. Revenue rose 16% due to stronger sales of the company’s server software and Xbox 360 video-game consoles. Quarterly profit declined to $2.83 billion, or 28 cents a share, from $3.7 billion, or 34 cents a share, a year earlier. The most recent numbers include legal charges of 3 cents a share. Microsoft forecasted for the current fiscal year to be above expectations. The company additionally announced a tender off to repurchase $20 billion worth of its stock and a further buy back program for another $20 billion.

Advanced Micro Devices Inc. ((AMD)), the world''s No. 2 PC chips maker, said that its second-quarter net income totaled $89 million, or 18 cents a share versus $11 million, or 3 cents a share last year. Sales were $1.22 billion compared with $1.26 billion a year earlier. The company’s prior-year results included the company’s NOR flash division, which was spun off in the second half of 2005. AMD sees sales for the third quarter above the year-ago levels.

Ericsson ((ERICY)), the Swedish telecom equipment maker reported 1.7% decline in net income to SEK5.7 billion in the second-quarter as net sales advanced 15% to SEK44.2 billion. Sales in Western Europe climbed 26%, thanks to sales from the company''s services business and the added Marconi business, while mobile phone sales volumes remained unchanged from a year ago. North American sales plunged 42% as operators cut excess inventory. Ericsson expects its core markets to grow moderately in 2006 versus 2005.


[R]8:00AM Oil prices declined Friday morning.[/R]
Crude oil prices declined Friday morning, following comments by the U.S. Federal Reserve Chairman Bernanke that ‘the increase in energy prices is clearly making the economy worse off both in terms of real activity and in terms of inflation. There is no question about it.’

Light, sweet crude for September delivery slipped 18 cents to $74.09 a barrel in Asian electronic trading on the Nymex. Gasoline futures Friday rose slightly to $2.2485 a gallon, while heating oil prices were slightly up to $1.9369 a gallon. Natural gas futures dropped 19.8 cents to $5.893 per 1,000 cubic feet. September Brent on London''s ICE Futures exchange was down 32 cents to US$73.40 per barrel.

Oil prices have retreated from recent highs after data showed that U.S. petroleum inventories grew across the board last week, but there are still lingering worries about the Middle East crisis. The fighting between Israel and militants in Lebanon that started last week lifted crude futures to a record $78.40 last Friday, on fears that the fighting would escalate into a regional war and disrupt supplies.


[R]7:00AM Asian markets closed in the red. The Nikkei lost ground.[/R]
Asian-Pacific benchmarks sharply reversed from yesterday’s strong rally due to a heavy sell-off on profit taking. Negative sentiment was also generated by lower close on Wall Street, following disappointing quarterly results from Intel Corp. and weaker manufacturing data. The Nikkei rebounded from 3.1% advance Thursday to close down 0.84%, with notable weakness in property shares-Mitsubishi Estate off by 2.4% and Sumitomo Realty & Development, down 1.7%. Among other losing stocks, Softbank lost 3%, Yahoo Japan declined 2%, and Toyota Motor lost 0.7%. Across the region, Hong Kong’s Hang Seng finished down 0.27%, South Korea’s Kospi lost 0.1%, and Australia’s benchmark slid 0.72%. China’s Shanghai Composite rose 0.6%, led by financial stocks, benefiting from strength of the yuan against the dollar.

European stocks moved lower at mid-day trading Friday, reflecting weaker U.S. markets close overnight and disappointing earnings reports from heavyweights in the tech sector. Following disappointing quarterly results from Intel Corp., European tech stocks came under pressure after German chip maker Infineon Technologies dropped 4% on 23% revenue growth but 1% drop on a sequential basis. Swedish telecom equipment maker Ericsson also contributed to the weakness in the sector, falling 0.9% on Q2 profit decrease, despite improved sales. Online poker operator PartyGaming advanced 0.9% on Q2 revenue jump by 49%. The German DAX 30 slipped 0.3%, the French CAC 40 declined 0.2%, and London FTSE 100 dropped 0.3%.