Aetna Slips 19% on Earnings

Elena
27 Jul, 2006
New York City

The energy sector strengthened on gains for Exxon Mobil and Royal Dutch Shell. Comcast, the biggest cable operator, rose 4.6% on better-than-expected Q2 earnings. Hewlett-Packard also supported the Dow, rising 2.1%. On the downside, Aetna dipped 19.4% as Q2 net income fell on higher medical costs. Dow Chemical, the largest U.S. chemicals maker, dropped 10% on profit that missed analyst estimates.

[R]11:30AM The Nasdaq underperformed the Dow and S & P 500.[/R]
Stocks continued to show some strength in morning trading. The Dow outperformed the Nasdaq and S&P 500, although all the major averages fell off their best levels for the session. Blue chips rose after Exxon Mobil Corp. ((XOM)) posted earnings that beat forecasts, but the broad market gave back some of earlier gains due to some high-profile earnings disappointments. Comcast Corp. ((CMCSA)), the biggest U.S. cable operator, also exceeded expectations, and its stock hit a 52-week high. Exxon shares rose 1.3% to $67.42, while Comcast shares climbed 4.6% to $34.02.

The semiconductor sector posted some strength, helping to keep the tech-heavy Nasdaq in positive territory. National Semiconductor ((NSM)) and KLA-Tencor ((KLAC)) moved notably higher. Oil service stocks traded higher as the price of oil rose on the heels of news of supply outages in Nigeria. The brokerage, telecommunications, and computer hardware sectors also moved to the upside. Among computer hardware stocks, Dow component Hewlett-Packard ((HPQ)) gained 2.1%. Meanwhile, health insurance stocks remained under pressure, with Aetna ((AET)) falling 19.4% as Q2 net income fell on higher medical costs. The health insurer stood out as the biggest drag on the S&P. Again on the downside, Dow Chemical Co. ((DOW)) the largest U.S. chemicals maker dropped 10% on profit that missed analysts'' estimates. In late morning trading, the Dow climbed 75.08, or 0.68%. The Standard & Poor''s 500 index was up 4.80, or 0.38%, and the Nasdaq composite index gained 9.83, or 0.47%. Bonds wobbled, with the yield on the 10-year Treasury note flat at 5.03%from late Wednesday.


[R]New home sales notably declined in June.[/R]
Thursday morning, the Department of Commerce released its closely watched report on new home sales in the month of June, showing that new home sales showed a significant decline compared to a downwardly revised reading for the previous month. The report showed that new home sales fell to a seasonally adjusted annual rate of 1.131 million units in June from a downwardly revised rate of 1.166 million units in May. Economists had expected sales to fall to a 1.164 million unit rate compared to the 1.234 million unit rate originally reported for the previous month. The drop in new home sales was partly due to a significant decrease in sales in the Northeast, which fell 11.3 percent. Sales in the Midwest and the South also fell 7.9 percent and 6.0 percent respectively. At the same time, sales in the West increased by 8.2 percent in June, helping to the limit the downside. The report also showed that the seasonally adjusted estimate of new houses for sale at the end of June rose 0.7 percent to 566,000. The Commerce Department said that this represents a supply of 6.1 months at the current sales rate.


[R]10:30AM Sensex in India rallied for the fourth day in a row.[/R]
Sensex gained 124.32 points or 1.1% to close at 10,741. The index traded in a highly volatile pattern on the day of derivative contracts settlements. The daily turn-over volume on the BSE rose to $622 million, a jump of 15% from the previous session. Investment flows from the international investors are running annual rate of $9 billion, lower than $10.9 billion in the year 2005.

State Bank of India reported first quarter total income decline of 1% and net profit decline of 34%. The largest national bank reported net income of Rs 789.5 crore on net income of Rs 10,958 crore. The bank stock rose 3.5% and closed at Rs 798. The bank has asked Indian government for a permission to raise more capital from local investors. Local investors currently hold less than 7% in the bank, foreign investors hold less than 20% and rest is owned by Government of India. The bank has one of the largest branch networks in the world reaching out to the smallest villages in India.

Maruti Udyog, largest automaker in India, reported 19% rises in sales and 63% growth in earnings. The company reported revenue of Rs 3,125 crore and net profit of Rs 369 crore. The company sold in the quarter 144,948 vehicles.

Luxury hotel chain Indian Hotels rose 3.5% to close at Rs 1,195 on the news of 10 to one stock bonus and earnings report of Rs 38.5 crore. The company has seen no significant room cancellation despite recent bombings in Mumbai, India.


[R]9:45AM Stocks opened in the positive on Exxon and Shell.[/R]
Stocks advanced at opening as surging profit growth at Dow components Exxon Mobil and Royal Dutch Shell offset the negative sentiment generated by weak results at Bristol-Myers Squibb Co. Exxon''s earnings jumped 36% to reach the second-highest level ever reported by a public U.S. company, while Shell saw a 40% rise in profit.

The semiconductor sector was one of the market''s best performances in early trading, helped by KLA-Tencor ((KLAC)), up 3.5% ahead of Q4 revenue release. Gold stocks posted solid gains as the price of the precious metal shot up. The brokerage sector also advanced, supported by Raymond James ((RJF)). Meanwhile, the health insurance sector came under pressure in early trading, with Aetna ((AET)) falling 19.8%, even though the insurer reported Q2 earnings that beat analyst estimates and raised its full-year guidance. Networking, biotechnology, and pharmaceutical stocks also moved to the downside. Among networking stocks, Tellabs ((TLAB)) dropped 10.9%, despite reporting better-than-expected Q2 earnings growth. In the first hour of trading, the Dow climbed 57.96, or 0.52%. The Standard & Poor''s 500 index was up 5.35, or 0.42%, and the Nasdaq composite index gained 17.03, or 0.82%. Bonds advanced, with the yield on the 10-year Treasury note slipping to 5.02% from 5.03% late Wednesday.

[R]Initial jobless claims fell unexpectedly.[/R]
The Department of Labor released its report on initial jobless claims in the week ended July 22 on Thursday, showing that jobless claims fell unexpectedly. The report showed that jobless claims fell to 298,000 from the previous week''s revised figure of 305,000. Economists had expected jobless claims to rise to 310,000 compared to the 304,000 originally reported for the previous week. The Labor Department also said that the less volatile 4-week moving average fell to 312,750 from the previous week''s revised average of 317,000. This marked the second consecutive decrease by the moving average. The report also showed that continuing claims for the week ended July 15 fell to 2.475 million from the preceding week''s revised level of 2.498 million.

[R]Durable goods orders growth exceeded estimates.[/R]
Thursday morning, the Department of Commerce released its report on durable goods orders in the month of June. The report showed that durable goods orders rose much more than economists had been expecting. The report said durable goods orders rose 3.1 percent in June following a revised 0.3 percent increase in May. Economists had expected orders to increase by about 1.9 percent compared to the 0.2 percent decrease originally reported for the previous month. The increase in durable goods orders was largely due to a rebound by orders for transportation equipment, which rose 8.6 percent in June after falling 2.8 percent in May. Significant growth in orders for commercial and defense aircraft and parts contributed to the increase. Excluding orders for transportation equipment, durable goods orders rose by a more modest 1.0 percent in June compared to a 1.5 percent increase in May. The report also showed that shipments of durable goods edged up 0.1 percent in June following a 3.0 percent increase in May. The Commerce Department said that shipments have increased in four out of the last five months. Additionally, inventories of durable goods rose 0.6 percent in June after increasing by 0.7 percent in the previous month. Inventories have risen in five out of the last six months.


[R]9:00AM Stock futures pointed to a higher opening[/R]
U.S. stock futures pointed to a higher market opening, boosted by optimism about second-quarter earnings, despite some high-profile disappointments. Positive sentiment was generated by better-than-expected quarterly results, with Dow component ExxonMobil ((XOM)) among the companies that exceeded analyst estimates. The oil giant reported Q2 net income jump of 36% to $10.36 billion, the second largest quarterly profit ever recorded by a publicly traded U.S. company. The company said that the profit growth reflected higher crude oil and natural gas prices. Drug maker Bristol-Myers Squibb ((BMY)) also reported Q2 earnings that came in above analyst estimates. The company said net sales fell to $4.87 billion but beat analyst estimates of $4.76 billion.

DaimlerChrysler ((DCX)) announced Q2 profit more than doubled due to an improvement at its Mercedes unit. The German-U.S. automaker earned 1.81 billion euros, compared to 737 million euros in 2005. Boston Scientific ((BSX)) swung to Q2 loss on costs related to its recent $27 billion acquisition of Guidant Corp. The company reported a loss of $3.21 per share vs. a profit of 24 cents per share a year ago. The housing sector may see some weakness after Pulte Homes Inc. ((PHM)), the No. 2 U.S. home builder, reported a steep decline in profit and new orders and cut its earnings forecast. S&P 500 futures were up 5.6 points, above fair value. Dow Jones industrial average futures rose 46 points, and Nasdaq 100 futures gained 9.75 points.

ExxonMobil ((XOM)), oil company, reported Q2 net income jump of 36% on 12% revenue growth, the second largest quarterly profit ever recorded by a publicly traded U.S. company. The oil giant reported profit rise to $10.36 billion, or $1.72 per share compared to $7.64 billion or $1.20 per share last year, beating estimates of $1.64 per share.

Cummins Inc. ((CMI)), engine maker, said that its second-quarter net income increased to $220 million, or $4.38 a share, from $141 million, or $2.83 a share, a year ago. Sales grew 14% in the quarter to $2.84 billion from $2.49 billion last year. The company said it sees third quarter earnings in the range of $3.35 to $3.45 a share and raised its fiscal 2006 outlook to $14 to $14.20 a share, up from the earlier issued guidance of $12.40 to $12.60 a share.

AutoNation ((AN)), auto retailer, said it earned $72.7 million, or 32 cents a share, in the second quarter, down from $194.8 million, or 73 cents a share a year ago. Earnings from continuing operations dropped to 33 cents a share from 40 cents. Revenue dipped to $5.01 billion from $4.94 billion.

Teledyne Technoloies Inc. ((TDY)) posted second-quarter net income of $20.9 million, or 59 cents a share, up from $16.1 million, or 47 cents a share a year ago due to favorable business mix. Sales climbed to $348.1 million from $303.3 million last year.

Jarden Corp. ((JAH)), consumer products maker, said that its second-quarter earnings advanced to $13.3 million or 20 cents a share, from $5.7 million, or 12 cents a share, a year ago. Excluding non-recurring items, earnings would have risen to 60 cents a share from 58 cents a share last year. Revenue climbed to $962 million from prior-year''s $754.4 million.

Bowater Inc. ((BOW)), newsprint producer, said that its second-quarter loss expanded to $10.6 million or 18 cents a share, from $3.6 million, or 6 cents a share, a year ago. Sales increased fractionally in the quarter to $899.4 million vs. $897.5 million last year. After a loss related to sale of assets, a tax adjustment and foreign exchange gain, adjusted quarterly income would have totaled 31 cents a share.

Coca-Cola Enterprises ((CCE)) said second-quarter net income rose 1.8% to $339 million, or 71 cents a share, from $333 million, or 70 cents a share a year ago. Revenue jumped 6% to $5.5 billion. Earnings per share totaled 57 cents after adjustments. The bottling company expects full-year earnings in the range of $1.27 to $1.32 a share, excluding restructuring costs and favorable tax items.

Ethan Allen Interiors Inc. ((ETH)), home furnishings retailer, said fiscal fourth-quarter income increased to $22.4 million, or 66 cents a share, from $19.5 million, or 56 cents, a year earlier. Sales for the quarter climbed to $272 million from $242.3 million last year. For fiscal 2007 the company expects earnings per share to grow in the range of 10% to 12%.

Southern Co. ((SO)) said that its second-quarter net income fell to $385.2 million, or 52 cents a share, from $386.8 million, or 52 cents, a year ago. Revenue advanced 15% to $3.59 billion from $3.12 billion reported in the prior-year comparable period.


[R]8:00AM Oil prices slightly advanced.[/R]
Crude oil prices slightly advanced Thursday, with traders keeping an eye on Middle East developments. Light, sweet crude for September delivery rose 14 cents to $74.08 a barrel in electronic trading on the Nymex, after closing slightly higher after U.S. government data showed a large drop in gasoline supplies. September Brent on London''s ICE Futures exchange gained 10 cents to $74.10 a barrel. In other Nymex trading Thursday, gasoline futures fell 0.72 cents to $2.2890 a gallon and natural gas futures were up 10.4 cents to $6.991 per 1,000 cubic feet. Heating oil futures rose slightly to $1.96 a gallon.

In its weekly petroleum report Wednesday, the U.S. Energy Department said summer gasoline demand in the U.S. was almost 2% higher than last year despite $3-a-gallon pump prices. Gasoline inventories fell last week by 3.2 million barrels to 211 million barrels, just 500,000 barrels more than last year. Over the past four weeks, average U.S. gasoline demand was 9.6 million barrels a day, or 1.8% higher than last year.

Prices have fluctuated rather mildly this week as traders watched to see whether the violence would affect other countries in the oil-rich market. Oil prices hit a record $78.40 high on July 14, two days after fighting broke out between Israel and Hezbollah militants in Lebanon, on fears that the violence would escalate into a regional war and disrupt supplies, particularly from Iran.