MasterCard Falls 5% despite Solid Profit

Elena
09 Feb, 2007
New York City

MasterCard said its Q4 net income exceeded expectations as strong consumer spending boosted transactions. The company posted quarterly profit of 30 cents per share, compared with a loss of 39 cents a year earlier. Revenue rose 17.2% to $839 million. MasterCard raised its quarterly cash dividend by 66.7%. The results drove shares of the compaany to an all-time high before tumbling 5%.

[R]9:45AM Upgrades drove market opening up.[/R]
Upgrades for the Big Three automakers and a sector upgrade for the semiconductor industry boosted U.S. market opening. Ford Motor ((F)) rose 3.6% and General Motors ((GM)) increased 5.1% after Deutsche Bank upgraded their stock on hopes for favorable healthcare negotiations. Citigroup upgraded Daimler Chrysler ((DCX)) sending its stock 2.3% higher. Among chip stocks, Dow component Intel added 0.5%.

Companies releasing earnings reports included Gateway Inc., MasterCard International Inc. and Weyerhaeuser Co. Gateway Inc. ((GTW)) stock fell 7% as the computer maker''s quarterly revenue fell 9% from year-earlier levels. MasterCard Inc. ((MA)) said its Q4 net income exceeded expectations as strong consumer spending boosted transactions. The company posted quarterly profit of $41 million, or 30 cents per share, compared with a loss of $53 million, or 39 cents per share, a year earlier. Revenue rose 17.2% to $839 million from $716 million a year ago. MasterCard raised its quarterly cash dividend by 66.7% to 15 cents per share from 9 cents per share. The results drove shares of MasterCard to an all-time high before tumbling 5% in early trading.

Weyerhaeuser Co ((WY)), forest products maker, said it swung to a Q4 profit from a year-ago loss. The company posted earnings of $1.88 per share, compared with a loss of 86 cents per share, beating estimates of 75 cents a share. Revenue fell 1% to $5.66 billion. In the first hour of trading, the Dow Jones industrial average was up 33.17, or 0.26%, at 12,670.80. The Standard & Poor''s 500 index was up 4.00, or 0.28%, at 1,452.31, and the Nasdaq composite index was up 7.77, or 0.31%, at 2,496.44.


[R]9:00AM Market futures traded flat. The Big Three received a broker upgrade[/R]
U.S. stock futures traded near the flat line Friday, with investors digesting broker upgrades of the Big Three automakers and a jump by crude oil prices. Hedge fund operator Fortress Investment Group was also in focus, as the market awaited its first trading day after it priced its initial public offering late Thursday. General Motors ((GM)) rose 2.6% and Ford Motor ((F)) climbed 4% after the car makers were upgraded by Deutsche Bank to buy from hold, on hopes for favorable healthcare negotiations. DaimlerChrysler ((DCX)) was upgraded to buy at Citigroup ahead of its restructuring plan for Chrysler. Fortress Investment Group ((FIG)) priced its initial public offering at $18.50 per Class A share, the top end of its indicated range. The hedge fund operator is due to kick off trading Friday.

In other broker moves, J.P. Morgan raised its rating of the U.S. semiconductor sector to bullish from cautious on expectations that several leading indicators will begin to improve in the second quarter. Leading chip maker and Dow member Intel ((INTC)) was up 0.3% in the pre-open. On the corporate news front, Alcatel-Lucent ((ALU)) said it would cut 12,500 jobs, over 3,000 more than it originally planned. It reported Q4 operating profit decline in line with expectations. The stock was down 0.7% ahead of the open. Among other pre-market highlights, Hasbro ((HAS)) reported better-than-expected Q4 earnings and revenue and lifted its quarterly cash dividend by 33%. Gateway Inc. ((GTW)) reported a 9% revenue decline. Quiksilver ((ZQK)), the sports apparel maker, cut its forecast. S&P 500 futures inched 0.20 of a point higher to 1,454.10 and Nasdaq 100 futures were unchanged at 1,821.75. Dow industrial futures were also unchanged.


[R]8:30AM Laidlaw International agreed to be bought by the U.K.’s First Group for $3.6 B.[/R]
Laidlaw International Inc. ((LI)) agreed to be acquired by the U.K.''s First Group Plc in a deal worth $3.6 billion, including the assumption of around $700 million of debt. First Group said it will pay $35.25 a share for Laidlaw, the biggest school and intercity bus operator in the U.S. The deal represents an 11% premium to Thursday''s closing price.

The U.K. group, which operates bus and rail services across Britain, said the deal will create a more robust business and should result in annual cost savings of around $70 million. But First Group said that Laidlaw''s Greyhound intercity bus service could be sold off after the deal as it may not fit with its own operations. Greyhound has around 11,000 staff and contributed to roughly 40% of the U.S. group''s $3.1 billion revenue in fiscal 2006.

Laidlaw agreed to pay First Group a fee of up to $78 million in certain circumstances if the deal does fails, while First Group would pay a break fee of $43.35 million. Shares in First Group gained 4.5% in London. Laidlaw shares jumped 8.8% in pre-market trading.


[R]7:30AM NY-6:30PM Mumbai Sensex declines Friday on inflationary data.[/R]
Sensex in India reached a new intra-day high of 14,724 but quickly lost the momentum and fell to close at 14,724. Weekly measure of wholesale price index fueled the fears of interest rate hike. Stocks in banks, cement and IT sectors fell. Rupee rose. Bajaj Auto soared 17% on news reports of various Bajaj related financial firms to be consolidated. Foreign investors continue to add new funds in the Mumbai market.

Trading Highlights

The 30 share index BSE Sensex lost 114 points to close at 14,538.90. In the early morning trading the index rose to a new intra-day high to 14,724 but quickly lost its upward momentum. The index traded with 466 points volatility and lost ground in the afternoon trading. Of the thirty stocks in the index only seven stocks rose and the rest declined. Market breadth was weak and in trading on BSE 622 stocks gained, 2,043 lost and only 45 stocks were unchanged.

On BSE trading market turnover declined to Rs 4,332 crore from Rs 5,136 crore in Thursday trading. According to preliminary international trading data, foreign institutions invested net of Rs 2,211 crore between February 2nd and 7th of this year.

Reliance Industries, Zee Telefim, Reliance Communication, Larsen & Toubro and State Bank of India were the most active stocks based on market turnover statistics reported by BSE daily report.

Economic News

The rising inflation index spoiled market mood. Annualized wholesale price index at the end of last week was reported at 6.58%. Inflation index in the prior week was reported at 6.11%. Rising food prices, land and housing cost and energy prices have been fueling inflation. At the end of Jan, Reserve Bank of India raised its key lending rate by 25 basis points and left the impression that future rate hikes may be necessary to curb inflation.

Stocks on the Rise

Weak trading across various market caps kept the list of stocks on the rise short.

Zee Telefim surged 5.33% to Rs 361. Oriental Bank gained 2.7% to close at Rs 232.40. CMC Limited, Punjab Llyod and Wyeth Ltd added close to 2%.

Bajaj Auto managed to close higher 1.3% to Rs 3,047 in BSE trading. Market expects that by the end of the fiscal year various subsidiaries will be consolidated under Bajaj Auto Finance. The stock of BAF rose 17% to close at Rs 432. JK Synthetic and NELCO limited surged 11% and 10% respectively.

Of the Sensex stocks, NTPC managed to gain 1.3% to close at Rs 144. Tata Motors continued its rise for the second day and rose 1.2% to close at Rs 906, Wipro advanced 0.8% to Rs 640 and HDFC added 0.7% to Rs 1,820.


Stocks on the Decline

Strengthening rupee kept information technology stocks under check. Satyam Computer lost 4%, TCS lost 1% and Infosys dropped 0.7%.

Cement stocks lost ground after gaining steadily during the week. ACC cement lost 3.5% to Rs1,032, Gujarat Ambuja dropped 1.9% to Rs 138.75 and Grasim declined 1.5% 2,815.

Inflation worries stoked fears of rising interest rates and pressured bank stocks. State Bank of India lost 0.8% to Rs 1,195, Bank of India dropped 3.3% to Rs 186 and Bank of Baroda declined 1.4% to Rs 238.

Larsen & Toubro signed an agreement to explore collaboration with European Space and Agency. The stock fell 2.3% to Rs 1,711 after rising for three days in a row.


[R]6:30AM European equities rebound Friday on banking stocks.[/R]
European markets were higher on Friday. By mid morning, Frankfurt Xetra Dax added 0.7% to 6,923.16, the CAC 40 in Paris gained 0.7% to 5,703.12 and London FTSE 100 climbed 0.8% to 6,394.7.

Advancers

Banks were in favor this morning. ABN Amro target price was upgraded on Friday by Fox-Pitt Kelton and the Dutch bank shares gained 1.7%. SEB, the Swedish bank, gained 1.7% after posting better-than-expected Q4 operating profit on strong capital market trading gains. In the telecom sector, Alcatel-Lucent gained 2.9% in spite of reporting a Q4 loss, as it targeted pre-tax savings of 1.7 billion euros over the next three years, and cutting up to 12,500 jobs. DaimlerChrysler lifted the auto sector after Citigroup upgraded the German carmaker from hold to buy and Peugeot rebounded 1.3%, having fallen in the previous two sessions after posting a narrower operating margin in 2006.

Decliners

Sanofi-Aventis shares led the decline in Paris, trading down 2.7% after it said that it lost a patent infringement suit filed in a U.S. district court in California against Amphastar and Teva Pharmaceutical over the Lovenox drug.

Oil and gold

Crude oil declined as traders reassessed the impact of an oilfield shutdown in California that triggered prices rally above $60 a barrel for the first time in five weeks. Oil for March delivery dropped 22 cents to $59.49 a barrel on the New York Mercantile Exchange in early trade in London. Brent crude oil declined 35 cents to $58.68 a barrel on the ICE Futures exchange. Gold fell in London as a five-week rally to prices above $660 an ounce failed to attract new buyers. Gold for immediately delivery dropped $1.50, or 0.2%, to $658.95 an ounce.

Currencies

The dollar inched back slightly against the euro on Friday, after indications by the European Central Bank that it would increase its key interest rates next month. The 13-nation euro bought $1.3003 in early Friday trading, down slightly from $1.3038 in late New York trading. The British pound bought $1.9458, down from the $1.9580 it reached Thursday following a decision by the Bank of England to keep its rates unchanged at 5.25%. The dollar advanced slightly against the Japanese yen, to 121.45, up from 121.05 yen Thursday.