UPS Drops 14% on Lowered Outlook

Elena
25 Jul, 2006
New York City

U.S. stocks opened flat due to a mixed batch of earnings reports and rising oil. United Parcel Service, delivery company, said that its Q2 net income jumped to 97 cents a share from 88 cents a share a year ago on 15% sales growth, but lowered its Q3 outlook. McDonald''s Corp. said Q2 net income advanced 57% to 67 cents a share from 42 cents a share a year earlier.

[R]9:45AM Stocks opened flat on mixed earnings reports.[/R]
U.S. stocks opened near the flat line, reflecting a batch of mixed earnings reports. Dow components Altria Group Inc. ((MO)) and DuPont Co. ((DD)) retreated despite positive Q2 results. 3M Co. ((MMM) slipped 5.4% on concerns about profit margins. McDonald's Corp. ((MCD)) advanced nearly 1% on better-than-forecast earnings.

In early trading the transportation sector moved notably to the downside, with UPS ((UPS)) helping to lead the sector lower, down 13.5%. Shares of JetBlue ((JBLU)) dropped 3.8% after the discount airline reported Q2 earnings above analyst estimates but provided disappointing guidance. Some brokerage stocks also came under pressure, with Legg Mason ((LM)) down 8% after reporting Q2 earnings that came in below analyst estimates. Meanwhile, oil service stocks posted some early strength, benefiting from an increase by the price of oil. Strength was also visible in the biotechnology sector, as Myogen ((MYOG)) boosted the sector on news of a delay in FDA approval of rival Encysive's ((ENCY)) Thelin. In the first hour of trading, the Dow dropped 24.82, or 0.22 %. The Standard & Poor's 500 index was down 1.23, or 0.1%, and the Nasdaq composite index added 1.24, or 0.06%. Bonds were flat, with the yield on the 10-year Treasury note steady at 5.04% from late Monday.


[R]9:00AM Tech stocks advanced on strong earnings.[/R]
U.S. stock futures were set to open little changed, taking a break from yesterday’s rally. However, tech stocks advanced, benefiting from Texas Instruments Inc.’s outlook. Texas Instruments ((TXN)), the biggest maker of chips for cell phones, reported higher quarterly profit and affirmed market expectations of robust growth. Company’s shares rose 3.5% in after-hours trading. Shares of SanDisk Corp. ((SNDK)), a maker of flash memory used in cell phones and digital cameras, jumped 15.3% after the bell after the company reported a quarterly profit above estimates. On a day of heavy earnings release from major companies, chemical manufacturer DuPont Co. ((DU)) reported lower Q2 profit, but the results beat analysts'' estimates. Among other Dow components, diversified manufacturer 3M Co. ((MMM)) posted quarterly results below expectations, while food and tobacco company Altria Group Inc. ((MO)) beat analysts'' estimates. McDonald''s Corp. ((MCD)) said quarterly profit rose to 67 cents a share, from 42 cents a share a year earlier, helped by a popular Happy Meal promotion and strong European sales. S&P 500 futures were down 0.5 point, but above fair value. Dow Jones industrial average futures were down 2 points, and Nasdaq 100 futures were up 4.75 points.

Altria ((MO)), the parent of Phillip Morris, reported adjusted earnings of $1.41 per share compared to analyst estimates of $1.37 per share. The company also raised its full year earnings guidance to $5.40 to $5.50 per share from $5.25 to $5.35 per share.

3M Co. ((MMM)), maker of diversified industrial and consumer products, said that its second-quarter net income climbed to $882 million or $1.15 a share, from $754 million, or 96 cents a share a year ago. Sales increased more than 7% to $5.69 billion from $5.29 billion in the prior-year period. Positive tax adjustment added 10 cents to net income, though this was overshadowed by expenses from an antitrust action and the management’s decision to sell the company’s branded pharmaceutical operations. The Dow component backed its earlier issued 2006 profit outlook of $4.55 to $4.65 a share, including 17 cents a share for stock options costs, while the third quarter earnings are expected to be $1.10 to $1.15 a share, including 4 cents a share for stock options expensing.

McDonald''s Corp. ((MCD)) said second-quarter net income advanced to $834.1 million or 67 cents a share, from $530.4 million, or 42 cents a share a year earlier. Net income includes 10 cents a share of income from the sale of Chipotle Mexican Grill shares and 2 cents a share of costs tied to impairment and a one-time impact from a tax law change. Total revenue increased to $5.57 billion from $5.1 billion, while global same-store sales added 5.5%.

AT&T Corp. ((T)), telecommunications company, reported 80% jump in quarterly net income to $1.8 billion, or 46 cents a share, from $1 billion, or 30 cents a share a year ago. Earnings totaled 58 cents a share before merger-related expenses tied to the purchase of AT&T by the ex-SBC. Revenue climbed 53% to $15.8 billion from $10.3 billion last year. The company plans to ramp up its share buyback program and repurchase $10 billion in stock by the end of fiscal 2007, with $2 billion to $3 billion this fiscal year.

The McGraw-Hill Companies Inc. ((MHP)) reported 13% increase in second-quarter net income to $221 million, or 60 cents a share, from $195 million, or 51 cents a share a year ago. Revenue climbed 4.9% to $1.5 billion. The company boosted its profit forecast to $2.44-$2.49 a share, from its previously issued guidance of $2.36-$2.41 a share. Record results at Financial Services, a solid performance in the U.S. college and university market, and effective cost containment were the main drivers of the successful performance in the quarter. Operating margin grew to 25.8%, up from 23.6% last year.

United Auto Group ((UAG)), auto retailer, said it earned $36.8 million, or 39 cents a share, in the second quarter versus $33.2 million, or 35 cents a share a year earlier. Revenue increased to $2.93 billion from $2.6 billion. The company now sees earnings of 37 to 40 cents in the third quarter and earnings of $1.35 to $1.40 a share for the full fiscal year.

Burlington Northern Santa Fe Corp. ((BNI)), railroad operator, said that its second-quarter net income jumped to $470 million or $1.27 a share, from $366 million, or 96 cents a share, a year ago. Revenue grew 18% to $3.7 billion bolstered by a 21% gain in coal revenue. The quarterly revenue included fuel surcharges of $425 million vs. $220 million last year.

Carlisle Companies Inc. ((CSL)), construction and industrial materials maker, said that second-quarter income increased to $56 million, or $1.80 a share, from $34.7 million or $1.11, a year earlier. Earnings from continuing operations totaled $1.76 a share. Sales for the quarter climbed to $692.7 million from $591.6 million last year. The company lifted its fiscal 2006 forecast to earnings from continuing operations of $5.25 to $5.45 a share, up from the earlier issued guidance of $5 to $5.20.

UPS ((UPS)), delivery company, said that its second-quarter net income jumped to $1.06 billion, or 97 cents a share, from $986 million, or 88 cents a share a year ago. Sales in the quarter grew more than 15% from last year’s levels to $11.74 billion. The company also guided third-quarter earnings to 87 cents to 91 cents a share and cautioned that 2006 earnings growth would be at the low end of the original 11% to 16% outlook.

Tuesday Morning ((TUES)), retail company, earned $2.9 million, or 7 cents a share, in the second quarter, down from $10.5 million, or 25 cents a share a year ago. Excluding special items, earnings declined to 8 cents a share from 25 cents last year. Sales slid 5.1% to $207.7 million. The average ticket rose from a year earlier but lower traffic in the company’s stores hurt the comparables. The management sees 2006 earnings at $1.05 and sales at $945 million.


[R]8:00AM Tokyo to approve U.S. beef imports.[/R]
Japan is close to an approval of resumption of U.S. beef imports this week after suffering growing pressure from Washington to reopen its beef market. Officials from Japan''s agriculture and health ministries are expected to decide soon on whether to allow U.S. beef back into Japan. Japan banned U.S. beef earlier this year amid concerns about mad cow disease, but agreed in principle to resume imports last month on the condition that Japanese inspectors found no problems at U.S. plants. The inspectors spent a month touring 35 U.S. meat processing facilities to find out if they meet Japanese guidelines. Japanese officials have not decided what to do if any problems are found at the U.S. plants. Health and agriculture officials were compiling a report on the inspections, and the government is expected to announce which facilities have been approved to provide beef for the Japanese market.