Time Warner Profit Falls, Tops Estimate

Elena
02 May, 2007
New York City

U.S. stock futures traded higher Wednesday, although a payroll data helped erase some of the earlier gains. The ADP national employment report said private employment gained 64,000 in April, the weakest job growth in four years. The media sector was in the spotlight as Time Warner reported earnings. The media giant said its Q1 profit slipped 18%, but beat expectations as revenue increased by 9%. Deal speculation in the sector also provided support.

[R]9:15AM U.S. stock futures traded higher. Jobs data were the weakest in 4 years.[/R]
U.S. stock futures traded higher Wednesday, although a payroll data helped erase some of the earlier gains. The ADP national employment report said private employment gained 64,000 in April, the weakest job growth in four years.

The media sector was in the spotlight as Time Warner ((TWX)) reported earnings. The media giant said its Q1 profit slipped 18% to $1.20 billion, or 31 cents per share, from $1.46 billion, or 32 cents per share a year ago, but beat expectations as revenue increased by 9%. Time Warner also raised its full-year profit outlook, saying it now expected to earn $1.05 per share. Among other companies releasing earnings before the opening bell, Chipotle Mexican Grill ((CMG)) rallied 3.4% in pre-open after the restaurant owner reported a stronger-than-forecast 56% profit rise.

Deal speculation in the sector also provided support. Dow Jones ((DJ)) continued to advance amid speculations that News Corp. ((NWS)) will raise its bid or that a rival suitor may emerge. In other deal news, Citigroup ((C)) agreed to buy financial services outsourcing company Bisys Group ((BSG)) for $1.45 billion in cash. S&P 500 futures rose 1.70 points to 1,494.40 and Nasdaq 100 futures inched up 0.50 of a point to 1,886.25. Dow industrial futures gained 17 points to 13,195.


[R]8:30AM News Corp. bid $5 billion for Dow Jones .[/R]
Rupert Murdoch’s News Corp. ((NWS)) launched a surprise bid for Dow Jones & Co. ((DJ)) valued at $5 billion, or $60 a share in cash, or a combination of cash and stock. The deal represents roughly 67% above the recent market value of Dow Jones, a massive premium at a time when most newspaper companies are losing readers and advertisers to the Internet.

The offer from News Corp. is expected to face obstacles. Dow Jones''s controlling shareholders, the Bancroft family, who own 24.7% of shares outstanding but hold 64.2% of the voting power, said they would block it. Dow Jones said late Tuesday that the Bancroft family said they would vote shares representing just over 50% of the company''s voting power against the deal. The shares shot up $19.87, or 54.7% in very heavy volume on the NYSE. Shares of News Corp. rose 1.2% in pre-market trading, while Dow Jones gained 0.5%.


[R]6:30AM European markets were higher Wednesday on strong media sector.[/R]
European markets advanced in early trade on Wednesday. By mid morning, Frankfurt Xetra Dax was 0.5% higher at 7,446.05, the CAC 40 in Paris added 0.5% to 5,989.09, and London FTSE 100 climbed 0.8% to 6,471.8. National benchmarks increased in all 16 western European markets that were open except for Sweden and Austria.

Advancers

London-listed BSkyB, which is 39% owned by News Corp, advanced 5.5% after posting better-than-expected customer growth in its third quarter. M6, the French commercial television broadcaster, gained 1% after reporting a 9.7 % increase in first-quarter sales. Other companies in the sector also gained including, Dutch publisher Wolters Kluwer rose 2.9%, while French peer Lagardere added 2.4%.

Novo Nordisk, the Danish drugs company, advanced 4.5% after reporting a better-than-expected 24% rise in first-quarter operating profit on strong growth in its European and North American markets. German household goods maker Henkel advanced 3.3% after it stated full-year sales growth would be at the upper end of estimates

Decliners

More potential deal news were at the center of attention on the stock exchanges. Shares of NYSE Euronext declined 3.5% after it disclosed in a filing that it has entered into a $3 billion syndicated revolving credit facility, which has prompted at speculation that it may gate-crash Deutsche Boerse agreed $2.8 billion acquisition of the International Securities Exchange. Deutsche Boerse shares declined 4.2%.

TeliaSonera AB fell 4.6%. The Swedish government announced it will sell a stake valued at about $2.9 billion in the biggest Nordic phone company to institutional investors as part of a plan to cede state holdings and reduce debt. Shire dropped 1%. The U.K. third-largest drugmaker will sell $1 billion in convertible bonds to fund the purchase of New River Pharmaceuticals.

Oil and precious metals

Crude oil advanced from a seven-day low on the expectation U.S. gasoline stockpiles declined last week as refiners shut units for repairs. Crude oil for June delivery rose to 27 cents, or 0.4%, to $64.67 in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement rose to 36 cents, or 0.5%, to $67.36 a barrel on London ICE Futures exchange.

Gold was little changed in Asia as investors bet the sell-off yesterday in the precious metal as the dollar rallied was overdone. Silver gained. Gold for immediate delivery rose to $1.95, or 0.3%, to $675.40 an ounce. Silver for immediate delivery gained 3 cents, or 0.2%, to $13.28 an ounce.

Currencies

The dollar was higher against other major currencies in European trading Wednesday morning. The euro traded at $1.3578, down from $1.3620 late Tuesday in New York. The British pound traded at $1.9933, down from $1.9996. The dollar fetched 120.09 Japanese yen, up from 119.72.