PepsiCo Beats Estimate

Elena
25 Apr, 2007
New York City

U.S. market averages traded firmly in the positive territory, with the Dow Jones briefly crossing the historic record of 13,000 points for the first time. The solid gains for the blue-chip average were generated by stronger-than-expected earnings reports and robust economic data. Companies beating forecasts included PepsiCo Inc., Corning Inc., Colgate-Palmolive and Dow member Boeing Co. Soft drink maker PepsiCo added nearly 1% after it posted 16% profit rise in Q1, beating expectations.

[R]11:30AM Wall Street continued to trade higher, boosted by Pepsi, Boeing, Colgate.[/R]
U.S. market averages traded firmly in the positive territory, with the Dow Jones briefly crossing the historic record of 13,000 points for the first time. The Dow continued rising to 13,036.99 before retreating below the 13,000 mark.

The solid gains for the blue-chip average were generated by stronger-than-expected earnings reports and robust economic data. Companies beating forecasts included soft drink maker PepsiCo Inc. ((PEP)), materials manufacturer Corning Inc. ((GLW)), consumer products company Colgate-Palmolive Co. ((CL)) and Dow member Boeing Co. ((BA)).

By sector, internet, multimedia networking, oil services and transportation led the market to the upside, while hardware and airlines stocks were the most notable decliners. Financial shares were also in focus after a consortium led by the Royal Bank of Scotland said it would bid around $100 billion for ABN Amro ((ABN)). Shares of ABN Amro rose 4.2%. Among brokers, Merrill Lynch ((MER)) lost 0.4% after it agreed to invest $3 billion in a Japanese bank.

The Dow Jones Industrial Average was recently up 23 points at 12,977, after earlier crossing the key level 13,000 for the first time. The S&P 500 gained 5.5 points to 1,486, while the Nasdaq Composite rose 7.1 points to 2,531.

[R]New home sales increased 2.6% in March.[/R]
The Department of Commerce released its report on new home sales in the month of March on Wednesday, showing that new home sales increased in March after showing a notable decline in February but came in below analyst estimates. The report showed that new home sales rose 2.6 percent to a seasonally adjusted annual rate of 858,000 units in March from the revised February rate of 836,000. Economists expected sales to rise to an 890,000 unit rate from the 848,000 unit rate originally reported for the previous month. With the increase in March, new home sales partly offset the 4.2 percent decrease that was seen in February, although they were still down 23.5 percent year-over-year.

The increase in new home sales was due in large part to substantial sales growth in the Northeast, which saw a 50 percent increase in new home sales. New home sales in the Midwest rose 9.8 percent, while sales in the South and West fell 2.7 percent and 0.9 percent, respectively. The report also showed that the median sales price of new houses sold in March was $254,000, up from $251,800 in February. Additionally, the Commerce Department said that the seasonally adjusted estimate of new houses for sale at the end of March was 545,000, which represents a supply of 7.8 months at the current sales rate. There was 8.1 months of supply in the previous month.


[R]9:45AM U.S. markets opened higher. The Dow hit 13,000-point milestone.[/R]
Wall Street opened higher, with the Dow Jones hitting the 13,000-point milestone for the first time in history, helped by strong corporate profits, stronger-than-expected economic data, and Alcoa’s plan to explore strategic alternatives for its packaging and consumer businesses. Amazon ((AMZN)) led the tech sector higher, jumping 19% on more than doubled Q1 profit. Apple ((APPL)) rose 1% ahead of earnings release after the close. Alcoa ((AA)) was the main blue-chip gainer, rising 5%.

Shares of IBM ((IBM)) and Hewlett Packard Co. ((HPQ)) rose 0.9% and 0.4%, respectively, after their rival Sun Microsystems Inc. ((SUNW)) reported quarterly sales below expectations. Shares of Sun Microsystems slipped 10%. Financial stocks were also in the spotlight after a consortium led by the Royal Bank of Scotland said it would offer $100 billion for ABN Amro ((ABN)), sending the Dutch bank shares up 4.6%. RBS said its bid will be launched provided that ABN’s unit LaSalle is halted. On Monday, ABN agreed to sell LaSalle to Bank of America ((BAC)) for $21 billion.

In the first half-hour of trading, the Dow was up 53 points at 13,009, crossing the key level for the first time at the open, as 24 of its 30 components advanced. The S&P 500 gained 5.64 points to 1,486, while the Nasdaq Composite rose 5.5 points to 2,530.

[R]Durable goods orders rose 3.4% in March.[/R]
Wednesday morning, the Department of Commerce released its advance report on durable goods orders in the month of March, showing that orders increased by much more than economists had been expecting. The report showed that orders for durable goods rose 3.4 percent in March following an upwardly revised 2.4 percent increase in February. Economists had expected orders to rise 2.5 percent compared to the 1.7 percent increase originally reported for the previous month. The increase in orders for durable goods, which are goods meant to last at least three years, was partly due to strong growth in orders for transportation equipment. Excluding orders for transportation equipment, durable goods orders rose by a more modest 1.5 percent.

The Commerce Department said orders for transportation equipment rose 8.0 percent in March after surging up 10.2 percent in February. A 37.6 percent increase in orders for commercial aircraft and parts helped to offset a 48.8 percent drop in orders for defense aircraft and parts. Notable increases in orders for non-defense capital goods, communications equipment, and machinery also contributed to the overall increase in durable goods orders. At the same time, the report showed that orders for defense capital goods showed a significant decline. Excluding defense, new orders for durable goods increased 4.5 percent. The report also showed that shipments of durable goods rose 0.8 percent in March following a 1.4 percent decrease in February. Additionally, inventories of durable goods rose 0.3 percent in March after edging up 0.1 percent in the previous month.


[R]9:30AM The FTSE 100 advances Wednesday on merger activities.[/R]
The UK market was higher on Wednesday. By mid-day, the FTSE 100 was up 30.9 points to 6,460.4.

Advancers

Shares in Sainsbury led the advancers as 250 million shares were traded this morning, equivalent to about 14% of the grocer, though details about the name of the purchaser remained officially undisclosed. Reports suggest that Qatar-based group Three Delta is behind the deal. Sainsbury shares were up 7%.

Although losing to RBS, Barclays rose 2%. Investors consider that there is little chance of Barclays sweetening its offer as they think its current bid is fully priced, while shareholders are unlikely to be convinced of the benefits of an improved offer.

Benefiting from updates, Punch Taverns rose 1.6% as Numis Securities issued a buy note on the pubs group. International Power added 2% as the group continued to benefit from a rise in power prices in Australia, where it operates several power stations.

Decliners

Royal Bank 72 billion pound cash and shares offer for ABN Amro created lots of interest. The proposal, made with partners Santander and Fortis, is 13% more than Barclays bid launched Monday. RBS has made the retention of US bank LaSalle a component of its offer. Royal Bank of Scotland lost 1.7%.

A number of stocks declined as they moved ex-dividend, including Northern Rock, down 4.4%, and Drax Group, off 1.6%.

Reuters was in line with forecasts for underlying revenue in the first quarter, but the weak dollar meant revenues overall fell by 1.1%. Underlying revenue growth was 6.5%, up from 4% at the same time last year. Full year revenue and margin guidance is unchanged. Reuters lost 0.8%.


[R]9:15AM Asian markets finish lower Wednesday on weak export-oriented stocks.[/R]
Asian markets ended lower Wednesday. The Nikkei 225 ended 1.2% lower at 17,236.16. Export-oriented stocks plunged with Sony down 1.9%, Matsushita Electric falling 2.1%. Canon bucked the downtrend, advancing 1.5% after the digital camera and office-equipment maker posted group quarterly net profit increase of 21%, and raised its full-year earnings forecast.

Worries about the likelihood of more tightening measures from Beijing and U.S. home sales data saw the Hong Kong stock market decline. Hong Kong Hang Seng Index closed 0.2% lower at 20,536.78. Chinese financial stocks in Hong Kong dipped with China Construction Bank off 0.4%, ICBC down 0.5% and China Life declining 0.2%.

Elsewhere around the region, markets also finished lower. Sydney S&P/ASX 200 settled 0.3% lower at 6,188.20, while South Korean Kospi index was off 0.7% to end at 1,545.55. Taiwan Weighted Price Index slipped 0.8% to close at 7,984.65 while Shanghai Composite Index in China bucked the trend and ended up 0.7% at 3,743.95.


[R]9:00AM U.S. stock futures pointed higher on strong earnings and durable goods orders.[/R]
U.S. stock futures advanced on Wednesday, pushed by better-than-anticipated durable goods orders and strong earnings reports from major companies. The Commerce Department said that orders for durable goods rose 3.4% in March to a seasonally adjusted $214.85 billion. A report on new home sales is also due out today, with analysts predicting higher new homes were sold in March. Further boost to the market sentiment, and the Dow Jones in particular, was given by robust corporate profits released by Amazon, Boeing, and Pepsi Co. Amazon.com ((AMZN)) jumped over 15% in pre-open trading after the Internet retailer posted a doubled Q1 profit on 28% sales growth.

Among pre-market earnings highlights, Boeing Co. ((BA)) announced 27% increase in Q1 earnings, due to robust orders for commercial airplanes and strong defense business. The world''s No. 2 commercial airplane maker earned $877 million, or $1.13 per share, up from $692 million, or 88 cents per share, a year earlier. Revenue climbed 8% to $15.4 billion. The quarterly results beat expectations of earnings per share of $1.01 on revenue of $15.02 billion.

PepsiCo Inc. ((PEP)) posted 16% profit rise in Q1, helped by strength of its international beverage and Frito-Lay snacks divisions. The world''s second-largest soft drink maker reported earnings of $1.1 billion, or 65 cents per share, up from $947 million, or 56 cents per share a year earlier on 9% revenue growth to $7.35 billion. Quarterly results came in above estimates of earnings of 61 cents per share on revenue of $7.18 billion.

Corning ((GLW)) said it earned $327 million, or 20 cents a share in Q1, up from $257 million, or 16 cents a share last year. The company said that excluding special charges, it would have earned 28 cents a share, above the 26 cents predicted by analysts. Sales climbed to $1.31 billion from $1.26 billion. Dow futures expiring in June rose 29.00, or 0.22%, to 13,036. The Standard & Poor''s 500 index futures rose 3.20, or 0.21%, to 1,491.70, and Nasdaq 100 futures rose 5.25, or 0.28%, to 1,875.50.


[R]8:15AM A consortium of banks is planning a $101 billion rival bid for ABN Amro.[/R]
A consortium of banks led by the Royal Bank of Scotland announced Wednesday it is planning to launch a rival bid to Barclays'''' offer for ABN Amro ((ABN)) on the condition that the sale of ABN’s unit LaSalle is halted. This move is likely to start one of the largest bidding wars in history, as earlier this week, ABN announced a deal with the U.K.''s Barclays ((BCS)), a management-approved offer that is contingent on its sale of LaSalle Bank to Bank of America going through.

The consortium, including Spain''''s Banco Santander and Fortis, offered a deal worth 39 euros a share, or around 74.5 billion euros ($101 billion), which is13% higher than the value of the all-share deal ABN Amro agreed with Barclays. The consortium''s bid would be approximately 70% in cash and 30% in RBS shares. The news sent shares in the Dutch bank up 5.4% in pre-market trading. Earlier this week, ABN announced a deal with Britain''s Barclays, a management-approved offer that is contingent on its sale of LaSalle Bank Corp. to Bank of America Corp. going through.


[R]8:00AM NY-7:00PM Mumbai Sensex ends higher Wednesday as Reliance Industries rallies.[/R]

The Sensex on BSE finished 81.05 points, or 0.57%, higher at 14,217.77.

The market-breadth was strong as there were three gainers for every two decliners. For 1,464 stocks which advanced, 1,058 declined and 77 stocks remained unchanged. Of the 30 stocks in the Sensex, 18 advanced, while the rest declined. The turnover on BSE was Rs 5,175 crore, lifted by two block deals of 12.50 lakh shares each, at average price of Rs 1,209 per share in early trade, in the TCS. In comparison, the turnover on Tuesday was Rs 5,115.51 crore. On NSE, the turnover was Rs 11,078.22 crore, compared with Rs 10,897.9 crore on Tuesday.

Economic news

The Indian rupee surged to a new nine-year high on Wednesday on continued capital inflows into the country and as RBI chose not to intervene in order to limit the gains. In early trade, one dollar fetched 41 rupees, highest value of rupee since May 1998. It had ended at 41.10 per dollar on Tuesday. IT companies were the worst hit by the appreciation of the rupee, as it directly impacts their revenue and profits, drawn from exports.

The target of 250 million cell phone subscribers is achievable according to the government, by the end of the year. The government has set a new objective, planning 500 million connections by 2010, besides nine million broadband lines by 2007-end.

Trading highlights

TCS was the most-active stock with a turnover of Rs 330 crore followed by Indiabulls Real Estate and Reliance Industries.

Advancers

Ranbaxy led the advancers, soaring nearly 6% to Rs 369. The company announced on Wednesday that it had been granted six months market exclusivity in the U.S. for the 80-mg dosage of the drug pravastatin sodium tablets, used to treat cardiac diseases. The 80-mg tablet had annual sales of $209 million, while the market for all dosages of the drug was $1.19 billion a year. Other pharma stocks also rallied including Cipla up 5.4% to Rs 252 and Dr Reddy, rising 0.9% to Rs 720.

Index heavy Reliance Industries advanced 1.1% to Rs 1,600, on a volume of 8.69 lakh shares, recovering from a low of Rs 1,560, surging to a high of Rs 1,605.15. Auto stocks surged on fresh buying interest. Hero Honda added 4% to Rs 687 and Tata Motors rallied over 2% to Rs 759.

HDFC Bank advanced 1.62% to Rs 1,030, as it reported 30.5% growth in net profit for its fourth-quarter earnings results. The bank also posted a net profit of Rs 343.57 crore in the same quarter, against Rs 263.21 crore for the same time a year earlier, while total income increased to Rs 2,384.19 crore compared with Rs 1,682.65 crore, the previous year.

Other advancers included ITC rallying 3.4% to Rs 162 and Hindustan Lever adding 2% to Rs 211. Cement stocks also gained. Grasim rose 2.6% at Rs 2,442 and ACC added nearly 2% to Rs 833, while Gujarat Ambuja was up 1% at Rs 121. ONGC ended up 2.5% to Rs 973.

Decliners

IT stocks led the decliners today as they came under selling pressure. Infosys Technologies slumped almost 2% to Rs 2,018 and Satyam slipped 1.8% to Rs 466. Tata Steel dipped 1.4% at Rs 571. Bharti Airtel was off 1% to Rs 863, while NTPC and Larsen & Toubro were also down around 1% each at Rs 157 and Rs 1,688, respectively.


[R]6:30AM European markets advanced Wednesday on merger deals.[/R]
European markets advanced on Wednesday. The U.K. FTSE 100 index rose 0.2% at 6,444.70, the German DAX Xetra 30 index increased 0.6% at 7,313.88 and the French CAC-40 index advanced 0.5% at 5,915.47. National benchmarks rose in 14 of the 17 western European markets that were open.

Advancers

Barclays advanced 2% after the consortium announcement and after ABN Amro also detailed how its agreed pact to sell its Chicago-based LaSalle operations to Bank of America for $21 billion can be broken.

German engineering company Siemens advanced 1.5% after it reported a 36% increase in quarterly net profit to 1.26 billion euros. Reportedly, the company is set to decide on the future of one of its top executives, Klaus Kleinfeld, on Wednesday.

LVMH Moet Hennessy gained 1.8% after posting first-quarter revenue rising 7% to 3.8 billion euros or rose 13% on a comparable basis.

Michelin shares rose 3.5% after the tire maker reported a 5.5% rise in first-quarter sales to 4.2 billion euros, after higher volumes and prices, and held to its fiscal year guidance.

Retailers were doing well as British supermarket chain J. Sainsbury was up 6.5% after a 250 million-share block trade spurred renewed takeover talk and as department store chain Marks & Spencer shares rose 2.3% after a management reshuffle.

Decliners

Shares for companies in the bidding consortium were down, with Royal Bank of Scotland dipping 1.1%, and Fortis down 2%. Spanish property companies kept losing ground, with Ibex-35 constituent Grupo Inmocaral down another 3.9% in Madrid as investors continued to worry about Spain property market bubble bursting.

Oil and precious metals

Crude oil rose after some U.S. refineries cut production while gasoline demand rose. Crude oil for June delivery rose 45 cents, or 0.7%, to $65.03 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June gained 74 cents, or 1.1%, to $67.90 a barrel on London ICE Futures exchange.

Gold broke two days of declines on speculation that a weakening dollar will increase investor demand for the precious metal. Gold for immediate delivery gained $2.20, or 0.3%, to 685.85 an ounce. Platinum rose $2.50 to $1,306.50, silver fell 0.5 cent to $13.78 an ounce and palladium gained $1.50 to $378.

Currencies

The dollar was lower against other major currencies in late European trading Wednesday morning. The euro traded at $1.3645, up from $1.3626 late Tuesday in New York. The British pound traded at $2.0045, up from $2.0000. The dollar fetched 118.65 Japanese yen, down from 118.68.