Schering and Merck Top Estimates

Elena
24 Jul, 2006
New York City

Stock futures indicated a positive start of trading session, supported by a couple of takeover deals and stronger-than-expected earnings reports. Drug maker Schering-Plough reported a Q2 profit above forecasts on sharply higher sales of its cholesterol drugs. Company

[R]9:00AM Stock futures pointed to a higher opening on mergers and earnings.[/R]
U.S. stock index futures indicated market opening on a positive note Monday morning, reflecting several major takeover deals as well as better-than-expected earnings reports.

In merger-and-acquisition news, Advanced Micro Devices Inc ((AMD)), the No. 2 supplier of computer processors, agreed to acquire graphics chip maker ATI Technologies Inc. ((ATYT)) for $5.4 billion in cash and stock. ATI surged 15.9%to $19.20, while AMD stock fell 6.1% to $17.15, both on the Inet electronic brokerage system. Hospital operator HCA Inc. ((HCA)) is reportedly close to an agreement to be acquired by an investor group for about $21 billion.

On the earnings news front, drug maker Schering-Plough Corp. ((SGP)) reported a Q2 profit above forecasts on sharply higher sales of its cholesterol drugs. Company’s shares rose 3.9%. Rival Merck & Co. ((MRK)) gained 1.7% after reporting earnings that beat expectations. The company also raised its full-year profit forecast. Other companies scheduled to report earnings include American Express Co. ((ADXP)) and Texas Instruments Inc. ((TXN)). S&P 500 futures were up 4.3 points, above fair value. Dow Jones industrial average futures rose 30 points, and Nasdaq 100 futures were up 6 points.


Schering-Plough Inc. ((SGP)), drugmaker, reported a second-quarter profit of $237 million, or 16 cents a share as sales improved 11% from a year ago to $2.8 billion. Including the company’s joint venture with Merck & Co. sales grew 18% to $3.3 billion.

Virginia Financial Group Inc. ((VFGI)), bank holding company, said that its second-quarter earnings of $5.2 million, or 72 cents a share, vs. $4.5 million, or 62 cents a year ago. Quarterly revenue increased to $19.1 million from the year-ago $17.9 million.

Radcom Ltd. ((RDCM)), network test and service-monitoring solutions provider, said that its second-quarter net income doubled thanks to 18% growth in revenue. Net at the Tel Aviv-based company was $208,000, or a penny a share versus $103,000 or a penny a share a year ago. The number of shares outstanding increased 3.2% to 16.6 million. Revenue came in at $5.7 million vs. $4.8 million last year as adjusted earnings amounted to 2 cents a share compared with 1 cent.

Gateway Financial Holdings Inc. ((GBTS)), the holding company for Gateway Bank & Trust Co., said that its second-quarter net income increased 68% as net interest income advanced 69% from a year ago. Earnings amounted to $1.5 million or 14 cents a share vs. $902,000, or 11 cents last year. Weighted average shares outstanding increased 31% to 11.1 million from 8.5 million in the prior-year period. Net interest income was $9.2 million compared with $5.4 million, while net interest margin was 3.88% vs. 3.76% a year earlier and 3.95% in the prior quarter. Total revenue jumped 56% to $11.7 million.

Astec Industries Inc. ((ASTE)), specialized infrastructure equipment manufacturer, posted second-quarter net income of $12.4 million, or 56 cents a share, compared with $10.2 million, or 49 cents a year ago. Quarterly sales rose 12% to $191.3 million as international sales comprised 28% of net sales for the most recent quarter vs. 19.4% last year. The company''s June 30 backlog amounted to $121.7 million, climbing 38.2% from 2005.

Titanium Metals Corp. ((TIE)) reported a 62% growth in second-quarter net income to $54.3 million, or 31 cents a share, versus $33.6 million, or 20 cents a share a year earlier. Revenue increased to $300.9 million from $183.7 million in the prior year comparable period.

TGC Industries Inc. ((TGC)), seismic data provider, reported 15% increase in second-quarter net income as revenue more than doubled. Net amounted to $2.1 million or 13 cents a share, compared with $1.8 million, or 14 cents, a year ago. Shares outstanding increased 20% to 15.7 million. Revenue totaled $14.9 million vs. $7.2 million last year due to productivity improvements. The quarterly performance was impacted by the unfavorable weather. The management added that the demand for the company’s services remains strong.


[R]8:00AM Advanced Micro Devices agreed to pay $5.4 B for ATI Technologies.[/R]
Advanced Micro Devices Inc. ((AMD)) announced Monday morning it agreed to pay $5.4 billion for the acquisition of top graphics chip maker ATI Technologies Inc., as Intel Corp.''s biggest rival in the market for personal-computer microprocessors attempts to expand its product portfolio. Under terms of agreement AMD will pay $4.2 billion in cash and 57 million AMD shares to acquire all of ATI''s outstanding stock, according to a news release. AMD will borrow $2.5 billion from Morgan Stanley to help fund the purchase. Based on AMD''s closing share price of $18.21 on Friday, the deal valued ATI''s shares at $20.47, a premium of almost 24% compared with ATI''s Friday''s closing price of $16.56 on the Nasdaq Stock Market. ATI shares surged more than 9% to $18.07 in pre-market trading.

AMD expects the deal to contribute modestly to earnings in 2007 and considerably to profit by 2008. The purchase is expected to save the combined company about $75 million by the end of 2007.

The new offerings would broaden AMD''s package of products as it takes on Intel, the world''s biggest chip maker that has long supplied a wider portfolio. Ontario-based ATI makes chipsets and graphics chips for PCs, as well as a host of semiconductors for consumer products, such high definition TVs and cell phones. According to analysts, the acquisition of ATI ‘would make AMD a bigger player with a more diversified portfolio,’ and ‘would certainly put AMD on a more equal footing relative to Intel.’


[R]7:00AM Asian markets closed down as techs weighed.[/R]
Asian-Pacific benchmarks closed slightly lower as gains for automakers helped limit losses brought by the tech sector after the Nasdaq hit a 14-month low. The Nikkei lost 0.18% as signs of strengthening domestic economy and strong June production figures for automakers offset declines among technology stocks. Japan’s largest PC maker NEC Corp. dropped 2.08%, while the country’s biggest chip maker Toshiba slipped 1.55%. Steel stocks and industrials shares also showed weakness. Automotive shares advanced after Toyota Motor reported domestic production increase of 10.25, and Honda Motor posted 8.8% growth. Across the region, Hong Kong’s Hang Seng lost 0.06%, with China’s Lenovo down 1.89% on Dell’s profit warning and modest weakness in the financial sector. South Korea’s Kospi dropped 0.6%, dragged by Samsung Electronics, down 1.5% and LG Electronics, down 0.56%. Stock markets in China, Taiwan, Thailand, and Australia also ended down.


European stocks recovered from last-week weakness to move higher at mid-day trading on stronger telecom shares and gains for consumer-electronics giant Philips Electronics. Retreating oil prices also provided support to sentiment. Vodafone Group climbed 2.7% after the company reported Q1 revenue growth of 9.2% and confirmed its outlook. Other telecommunication shares like BT Group, France Telecom, and Deutsche Telekom also advanced. Philips rose 3.9% on news that three private equity firms are bidding over $10 billion for its semiconductor unit. The German DAX 30 rose 0.9%, the French CAC 40 was up 0.7%, and London FTSE 100 surged 1%.