GM Gains on Operating Profit

Elena
26 Jul, 2006
New York City

U.S. stock futures pointed to a mixed opening on earnings reports from Amazon and GM. Amazon dropped 13% as the company lowered its profit outlook, while General Motors rose 4% in pre-market trading. The automaker posted Q2 profit loss of $5.62 per share vs. a loss of $1.75 last year on heavy restructuring charges, but operating profit well above estimates and 12% sales growth.

[R]9:00AM Stock futures pointed to a mixed opening on Amazon and GM.[/R]
U.S. stock futures pointed to a mixed opening on earnings reports from Amazon and GM. Tech and consumer stocks are expected to trade down as Amazon ((AMZN)) dropped 13% after the Internet auctioneer posted a sharp quarterly profit drop and cut its profit outlook. General Motors ((GM)) rose 4% in pre-market trading, providing support to blue-chip stocks. The automaker posted Q2 profit loss of $5.62 per share vs. a loss of $1.75 last year on heavy restructuring charges, but operating profit well above estimates and 12% sales increase.

Several technology-related shares also fell after the closing bell on disappointing earnings reports, including chip maker Xilinx Inc. ((XLNX)), down 7.4%, and Plantronics Inc. ((PLT)), down 2.8%. Jet maker and Dow component Boeing Co. ((BA)) fell 1.5% on Inet after reporting a loss in-line with analyst estimates. S&P 500 futures were unchanged, which left them below fair value. Dow Jones industrial average futures rose 1 point, and Nasdaq 100 futures rose 0.75 percent but were below fair value.


Lucent Technologies ((LU)), telecommunications equipment maker, said that its third-quarter earnings dropped to $79 million, or 2 cents a share, from $372 million, or 7 cents a share a year ago. Revenue slid to $2.05 billion from $2.34 billion last year, as the lower product revenue offset the growth in service revenue. Gross margin declined to 41% of revenue vs. 45% a year earlier.

P.F. Chang''s China Bistro ((PFCB)), restaurant chain, earned $8.1 million, or 30 cents a share, in the second quarter, versus $9.3 million, or 34 cents a share a year ago. Revenue climbed to $225.9 million from $198.1 million last year. The company cut its 2006 earnings forecast to $1.12, on estimates of a drop in revenue.

Air Products ((APD)), industrial company, earned $210 million, or 92 cents a share, in the third quarter, versus $190.6 million, or 82 cents a share a year ago. Revenue advanced 12% to $2.32 billion. The company lifted its full-year earnings projections to $3.49 to $3.53 a share, up 18% to 20% from last year.

Black & Decker Corp. ((BDK)), power tool maker, said that its second-quarter net profit increased 0.9% from a year ago to $152.2 million, or $1.98 a share, while sales declined 0.1% to $1.697 billion. The slight growth in power tools sales was offset by a 6% drop in sales of the company’s hardware and home improvement products. The company expects third-quarter earnings from continuing operations to be from 1.70 to $1.75 a share, while full-year earnings from continuing operations are projected to come in at $7.20 to $7.30.

International Flavors and Fragrances ((IFF)) reported 8% higher net income at $61.2 million, or 67 cents a share, with sales up 3% from a year ago to $531 million. The managements forecast sales to go up by a low-single-digit percentage and guided earnings in the range of $2.20 to $2.28 a share.

CGI Group Inc. ((GIB)), IT services firm, said that third-quarter net earnings declined 37.8% to C$35.9 million ($31.7 million), or C$0.11 a share, as revenue declined 7.5% to C$866.5 million. Revenue dropped hurt by the exchange rates and a decline in revenue from BCE, the company''s biggest customer. The company took C$15 million pre-tax costs tied to severance pay and restructuring issues.

PRA International ((PRAI)), clinical research organization, said that its second-quarter net income was $6.8 million, or 28 cents a share compared with $8.6 million or 35 cents a year ago. Quarterly revenue was $79.4 million vs. $85.2 million a year earlier. On an adjusted basis, the company would have reported earnings of 31 cents a share for the most recent quarter.

Monaco Coach Corp. ((MNC)), recreational vehicles manufacturer, posted second-quarter net income of $372,000, or 1 cent a share, down from $755,000, or 3 cents a year ago. Quarterly sales totaled $321.3 million vs. $304.5 million last year. Motorhome sales came in at 1,408 units, down 12.3% from a year ago. The management expects the third quarter to remain challenging and forecasted quarterly sales at $330 million to $340 million.


[R]8:00AM Blackstone Group is considering a bid for HCA.[/R]
Blackstone Group is reportedly considering a possible bid to top the $21.3 billion leveraged buyout of hospital chain HCA Inc. ((HCA)) by a group of private equity firms, including Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch & Co. Blackstone hasn''t yet invited other private-equity firms to join any potential offer.

Terms of the agreement give Bain, KKR and Merrill the right to top any counteroffer. A second bidder would have to go through due diligence, which could cost $10 million to $20 million, without the certainty that a deal would be reached. According to a filing with the SEC, a breakup fee of $300 million is payable to Bain, KKR and Merrill if a rival bidder tops the current agreement. If Blackstone outbids the rival offer, a bidding war may start, driving up the price, but ultimately making the deal less profitable.

Experts say that paying a higher price for the health-care company would be hardly possible. Besides, the sector is subject to regulation and possible legislative action due to surging health-care costs. Some potential Blackstone partners also have antitrust concerns as a result of investments in other hospital operators.

The investment bankers representing Morgan Stanley and the Credit Suisse unit of Credit Suisse Group, plan to open a data room to let prospective bidders examine HCA data. Shares of HCA closed Tuesday at $49.25 on the Nymex, a discount to the $51-a-share price tag of the buyout deal announced Monday.