Wal-Mart, Target Earnings Rise

Elena
14 Nov, 2006
New York City

Retailers reported mixed Q3 results. Wal-Mart Stores Inc. reported 11.5% profit increase, sending its shares up 3.6%. Target said Q3 profit rose 16%, helped by 11% sales increase. The retailer posted profit rise of 59 cents per share, up from 49 cents per share last year, beating expectations of 55 cents a share. Target sai same-store sales tose 4.6%. In contrast, Home Depot lost 1.5% after the retailer posted a 3.1% Q3 profit drop on a sharp decline in same-store sales.

[R]9:45AM Stocks opened mixed on economic reports.[/R]
Stocks were mixed at opening Tuesday, reflecting economic reports which signaled inflation is slowing and consumer spending is stronger than anticipated. Retailers reported mixed Q3 results. Wal-Mart Stores Inc. ((WMT)) said it had a strong 11.5% gain in profits despite weak sales figures. The world''s largest retailer cut slightly its forecast for the full year. The stock opened up 3.6%. Target ((TGT)), discount retailer Target, said Q3 profit rose 16%, helped by 11% sales increase. The retailer posted profit rise of 59 cents per share, up from 49 cents per share last year, beating expectations of 55 cents a share. Target said its revenue rose to $13.57 billion from $12.21 billion last year and reported a 4.6% same-store sales rise. At the same time, Home Depot ((HD)) lost 1.5% after the retailer posted a 3.1% Q3 profit drop on a sharp decline in same-store sales.

Housing stocks extended gains posted in the two previous sessions. D.R. Horton ((DHI)) helped to lead the sector higher, with the home builder rising 6.2% after the company reported Q4 results that fell year-over-year but still came in above analyst estimates. Some biotechnology stocks came under pressure, with MedImmune ((MEDI)), Affymetrix ((AFFX)), and Millennium Pharmaceuticals ((MLNM)) posting notable losses.

Among stocks, driven by analyst comments, Tessera Technologies ((TSRA)) fell 2.6% after First Albany downgraded its rating on the semiconductor equipment maker to neutral from buy. Meanwhile, shares of Equity Residential ((EQR)) rose 1.2% after Friedman, Billings, Ramsey upgraded its rating on the multifamily REIT to market perform from underperform. In the first hour of trading, the Dow Jones industrial average rose 12.17, or 0.10%, to 12,144.05. The Standard & Poor''s 500 index climbed 1.69, or 0.12%, to 1,386.11, and the Nasdaq composite index fell 0.77, or 0.03%, to 2,405.61.


[R]Retail sales edged down 0.2% in October.[/R]
The Department of Commerce released its report on retail sales in the month of October on Tuesday, showing that sales fell less than economist had expected. Retail sales fell a little more than expected excluding auto sales. The report showed that retail sales fell 0.2 percent in October following a revised 0.8 percent decline in September. Economists had expected sales to fall 0.4 percent, which would have matched the decrease originally reported for the previous month.

The decrease in sales was due in large part to a drop in sales at gas stations, which fell 6.0 in October after an 11.1 percent decline in September. A drop in gasoline prices contributed to the decline in gas station sales. Retail sales rose 0.4 percent excluding gas station sales. While sales at furniture and home furnishings stores, building material and garden equipment stores, and department stores also fell, sales at food and beverage stores and health and personal care stores showed notable increases. The report showed that sales by motor vehicle and parts dealers also increased, rising 0.6 percent in October following a 0.7 percent increase in September. Excluding auto sales, retail sales fell by 0.4 percent in October after a revised 1.2 percent decline in September. Economists had expected ex-auto sales to fall 0.3 percent compared to the 0.5 percent decrease originally reported for the previous month.


[R]9:30AM The FTSE 100 gains slightly in afternoon trading on miners, M&A.[/R]
At 2:30 GMT, the FTSE 100 in London is 1.90 points, or 0.03% higher, at 6,196.10.

Advancers

Home Retail and Experian, the old GUS, are both doing. Home Retail Group is 0.98% while Experian spurted 3.09%.

Vodafone was among the stocks, leading the gainers, up 0.55% %, as the largest mobile phone operator in the world reported a rise in interim revenues to 15.6 billion pounds and confirmed its guidance.

InterContinental Hotels was 1.3% higher after the hotels group posted a 10% increase in third-quarter revenue.

Resolution, the closed life fund consolidator, advanced 1.6% on hopes it could find a merger partner.

Engineering design group Aveva rose 11.20% as it issued another earnings upgrade. First half profits rose by 191% and the second will beat market forecasts Aveva announced.

Miners also enjoyed a strong showing after sharp falls in the previous session. Xstrata rose 1.4%, Rio Tinto gained 0.8% and Kazakhmys was 0.8% stronger.

Decliners

Acambis is one the worst peformers, down 38.19%, as the vaccine maker warned that the US has dropped it from its smallpox vaccine tender process.

BskyB took a hit, declining 1.36%, as Deutsche Bank announced that the satellite broadcaster guided down forecasts for next year.

Energy group and bid target Scottish Power started the day brightly but has slipped down 0.61% despite first half profits also topped the forecasts of analysts.


[R]9:00AM Stock futures turned higher on inflation data and retail results.[/R]
U.S. stock market futures turned higher before opening, as strong economic data eased inflation worries and raised optimism about consumer spending. Upbeat financial results from retailers also added to the positive sentiment. The Labor Department said that the producer price index fell sharply to a five-year low of 1.6% in October. The core PPI, which excludes food and energy costs, fell 0.9%, the biggest drop since August 1993. The weak numbers were a surprise, as economists were expecting the index to fall by 0.5%, while core prices were expected to rise 0.1%. In another report, the Commerce Department said that U .S. retail sales fell in October for the second month in a row, dragged down by falling gasoline prices. Retail sales fell 0.2% in October after a downward revision of 0.8% in September.

Among retailers, Wal-Mart Stores Inc. ((WMT)), the world''s biggest retailer, posted 11.5% higher quarterly profit to $2.65 billion, or 63 cents a share, compared with $2.37 billion, or 58 cents a year ago, beating estimates of 59 cents. Same-store sales were 1.5% higher. Wal-Mart forecast Q4 same-store sales would be up 1 to 2%. Wal-Mart shares rose 1% in electronic trading before the bell.

In contrast, Home Depot Inc. ((HD)), the world''s largest home improvement retailer, reported a quarterly profit below analysts'' estimates and sharply cut its forecast for earnings and sales growth in 2006. Its shares fell 3.8% before the bell. Home builder D.R. Horton Inc. ((DHI)) said Q4 profit fell 51% to 88 cents per share, compared with a profit of $1.77 per share last year on 4% revenue decline. Still the quarterly results exceeded estimates of profit increase to 69 cents per share. Homes closed fell 7% to 17,261, while net sales orders for Q4 dropped 25% to 10,430 homes. S&P 500 futures were up 0.40 point, but about even with fair value. Dow Jones industrial average futures were up 5 points and Nasdaq 100 futures were up 0.25 point.


[R]8:00AM Home Depot Q3 profit dropped on slowing housing market.[/R]
Home Depot ((HD)), the nation''s largest home improvement store chain, reported 3.1% profit drop in Q3, blaming slowing housing market with considerably lower same-store sales. The company said it earned $1.49 billion, or 73 cents a share, compared with a profit of $1.54 billion, or 72 cents a share a year ago, missing expectations of 75 cents a share. Revenue in the quarter rose 11.3% to $23.09 billion, up from $20.74 billion for the same period a year ago, but same-store sales dropped 5.1%. The company also lowered its full-year earnings per share and sales growth guidance.

The disappointing quarterly results were attributed to a slowing economy, falling home prices and slowing housing turnover. However, there was a bright spot in the quarter. The home builder posted growth in the company''s Home Depot Supply business, with sales surging 159% to $3.5 billion.

For the first nine months of 2006, Home Depot reported net income of $2.32 a share, higher than $2.11 a share a year ago on revenue increase of 13.8% to $70.57 billion. Home Depot said that 2006 earnings per share will grow 4% to 5% over fiscal 2005 and that sales will grow for the year by about 12%.


[R]7:30AM Asian stocks advance led by upbeat Japanese stocks.[/R]
Asian markets finished higher on Tuesday. The Nikkei 225 Index rose 1.7% to finish at 16289.55. Leading advancers were machinery stock Okuma jumping 11%. TDK adding 2.1%. Sumitomo Mitsui Financial Group increasing 4.2% and Mitsui Fudosan posting a 2.3% rise. However, shares in Aozora, a once-ailing Japanese bank turned around by U.S. private-equity firm Cerberus Partners and other investors, closed down 12% from its premarket IPO price.

In Hong Kong, the Hang Seng Index ended 0.1% higher at 18,878.42. Stocks closed only slightly higher as gains in China-related blue chips offset weakness in HSBC Holdings shares. Shares of HSBC declined 1.5% after the company posted a worrying fall in earnings at its U.S. units. Industrial & Commercial Bank of China gained 2.1%, while China Mobile increased 1.6%.

In Seoul, the Korea Composite Stock Price Index, or Kospi, rose 0.8% to 1,407.37. Samsung Securities gained 2.1% and Woori Investment & Securities rose 4%. Samsung Electronics gained 1.3% and Hynix Semiconductor rose 0.9%. Korean Air also jumped 4.2% despite announcing disappointing third-quarter results. Analysts believe prospects of Korean Air are likely to improve in the fourth quarter as oil prices began to fall from mid-August and are likely to remain stable for the rest of the year.

Other indices also gained. Australia S&P/ASX 200 rose 0.3%, while New Zealand NZX-50 Index ended 0.6% higher. Singapore Straits Times Index added 0.5% and Taiwan Weighted Price Index rose 1%.


[R]6:30AM European stocks advanced supported by telecom companies.[/R]
European markets were higher on Tuesday. By mid morning, the FTSE 100 in London added 0.3% 6,210.7, Frankfurt Xetra Dax gained 0.1% to 6,397.55, and the CAC 40 in Paris was marginally higher at 5,490.4.

Advancers

UK mobile group Vodafone kept its full-year guidance of 5 - 6.5% organic revenue growth after reporting a forecast-beating rise in first-half core earnings. Vodafone gained 2%.

Telefonica, the Spanish telecoms group, gained 0.7% after reporting a better-than-expected 43% rise in nine-month operating revenue.

Telekom Austria rose 2.1% after defying expectations of a profit decline. The company reported a 1% rise in third-quarter core profits thanks to growth in its international assets, including Bulgaria’s Mobiltel.

Other telecoms groups were feeling the wave of optimism in the sector, with TeliaSonera, the Nordic region’s biggest operator, up 1.4%. It received a number of broker upgrades after reporting its own set of strong results earlier in the month. Telenor, which also reported earlier this month, gained 1.5%. Telecom Italia added 1%.

Miners such as Rio Tinto and BHP Billiton also rose more than 1% after selling off sharply the previous day amid weaker metal prices.

Decliners

Sacyr Vallehermoso, which gained a massive 15 % in the previous session following record quarterly results, gave back 3.2% as profits were taken.

Italian bank Banca Lombarda e Piemontese slipped 3.6% after it said late on Monday that it will merge with Banche Popolari Unite in a deal that will create the sixth largest bank in Italy.

Oil and gold

Crude oil for December delivery on the New York Mercantile Exchange was 0.5% higher in London. The December Brent crude contract traded on London ICE Futures Exchange at $59.45 a barrel, up 40 cents.

Gold for immediate delivery fell $1.80, or 0.3%, to $623.90 an ounce in London. Prices dropped 1.5% in the previous two sessions.

Currencies

The euro was up slightly against the U.S. dollar Tuesday ahead of a key forecast on German economic sentiment and lower-than-expected inflation. The euro bought $1.2829, up from $1.2810 late Monday in New York. Among other currencies, the British pound fell to $1.8987 from $1.9013 while the dollar was down slightly to purchase 117.85 Japanese yen from 118.12 yen.