J.C. Penney Gains on Improved Outlook

Elena
17 May, 2007
New York City

Alliance Data Systems surged 26% after the provider of transaction, credit and marketing services agreed to be acquired by Blackstone Group in a deal worth $7.8 billion. The private-equity firm is paying $81.75 a share, a 30% premium to Wednesday''s closing price of Alliance Data, including debt. In other deal news, Acxiom surged 16% after the company agreed to be acquired by Silver Lake and ValueAct Capital for $3 billion, or $27.10 per share in cash, including debt assumption.

[R]9:45AM U.S. markets opened lower on profit taking ahead of economic data.[/R]
U.S. stocks opened lower on Thursday, with investors taking profit after recent rally ahead of data on leading economic indicators. Wall Street also awaited a speech by the Fed Reserve Chairman Ben Bernanke that could provide clues to whether problems with subprime mortgage loans could affect the broader economy. An increase by the oil price also weighed on market sentiment, as light sweet crude rose 47 cents to $63.02 on the Nymex.

Merger-and-acquisition news failed to lift market sentiment. Alliance Data Systems ((ADS)) surged 26% after the provider of transaction, credit and marketing services agreed to be acquired by Blackstone Group in a deal worth $7.8 billion. The private-equity firm is paying $81.75 a share, a 30% premium to Wednesday''s closing price of Alliance Data, including debt assumption. In other deal news, Acxiom ((ACXM)) surged 16% after the company agreed late Wednesday to be acquired by Silver Lake and ValueAct Capital for $3 billion, or $27.10 per share in cash, including the assumption of $756 million in debt.

On the earnings news front, J.C. Penney Co. ((JCP)) rose 4.5% after it posted a 13% increase in Q1 profit that fell slightly below analyst estimates. The retailer also raised its profit outlook for the year. Hewlett-Packard ((HPQ)) posted Q2 results that included an extra $3 billion in sales. The Dow Jones industrial average was down 18.04 points, or 0.13%, at 13,469.49. The Standard & Poor''s 500 Index was down 2.11 points, or 0.14%, at 1,512.03. The Nasdaq Composite Index was down 2.75 points, or 0.11%, at 2,544.67.


[R]9:30AM The FTSE 100 trades higher Thursday on oil stocks and deal talks.[/R]

The FTSE 100 in London added 12 points, or 0.2%, to 6,571.9 in lunchtime exchanges.

Advancers

The oil sector led the advance in London. Royal Dutch Shell rallied 2.5 per cent, as crude prices climbed towards $69 a barrel. BP was up 1.4 per cent and BG Group added 0.5 per cent.

Prudential advanced 1% on rumours that it may be broken up. Mark Tucker, chief executive of the insurer, is expected to come under pressure at the annual meeting of the company today to address calls to break up the business. Ratings agency Moody''s put a negative outlook on the UK arm.

Old Mutual gained after Deutsche Bank upgraded the insurer from hold to buy and its price target. It traded 2.5 per cent higher.

Credit information group Experian surged 2.4 per cent on reports that it could be a potential bid target after US peer Acxiom Corp agreed to be bought for $3 billion.

Emap shares were 6.2 per cent higher after the media group said that Tom Moloney was to resign as chief executive and step aside from the board by mutual agreement.

Decliners

BT Group lost 2.1 per cent after it reported fourth quarter results, largely in line with expectations. The company also announced details of a 2.5 billion pound share buyback. Underlying earnings for the three months to 31 March were up 3% on revenue 3% higher.

InterContinental Hotels shares declined tracking a strong rally in the previous session on renewed talk of bid interest. The stock shed 2 per cent.


[R]9:00AM Stock futures pointed to a lower opening.[/R]
U.S. stock futures declined Thursday following solid gains in the previous session. Market sentiment was hurt by profit taking amid expectations for a quiet day of economic news. Before the opening bell, the Labor Department said that U.S. initial jobless claims fell for a fifth-straight week.

In earnings news, Hewlett-Packard ((HPQ)) gained 1.7% in the pre-open after it posted Q2 results that included well-received extra $3 billion in sales. J.C. Penney Co. ((JCP)) reported a higher Q1 profit to $238 million, or $1.04 a share, up from $210 million, or 89 cents a share a year earlier, coming in sligktly above a profit of $1.03 a share. The quarterly results were attributed to private-label brands which helped margins. The department store operator also lifted its full-year earnings forecast.

In other corporarte news, Sun Microsystems ((SUNW)) rose 3.3% after announcing its board approved a buyback of up to $3 billion in outstanding shares. BT Group ((BT)) announced a buyback of nearly $5 billion along weith its Q4 profit. Acxiom Corp.((ACXM)), an information technology company, agreed to be bought in a deal worth $2.24 billion by private equity firms Silver Lake Partners and ValueAct Capital. The deal represents more than a 14% premium over Acxiom''s closing price Wednesday. S&P 500 futures fell 1.3 points at 1,516.70 and Nasdaq 100 futures fell 1.5 points at 1,899.75. Dow industrial futures declined 18 points.


[R]8:30AM Asian markets gain Thursday, while Japan finishes lower.[/R]

Asian markets finished mostly higher on Thursday.

Japanese Nikkei 225 settled down 0.2% to 17,498.60. Japanese economy grew at an annual 2.4% rate in the three months ended March 31, lower than the fastest pace in three years as companies reduced spending on cooling U.S. growth. Analyst expectated the growth to be around 2.7%. Export-driven companies benefited from the rise of the dollar against the yen. Sony rose as much as 3.3% a day after reporting strong earnings and Canon added 1.3%.

Hong Kong Hang Seng closed 0.3% higher at 20,994.61. Overnight gains on U.S. markets aided Hong Kong rise, with Cheung Kong, Citic Pacific and China Mobile leading the gainers. Cheung Kong rose 2%, outpacing the benchmark index, while Citic Pacific advanced 2% after the company announced Wednesday that it is in talks to sell its 25% stake in Air China Cargo to partner Air China. Citic Pacific also added it is interested in issuing Class A shares. China Mobile finished 0.1% higher on a report about its Class A-share listing plan.

Shanghai Composite advanced 1.6% to finish at 4,048.29. In Shanghai, the attractive valuations of Class B shares kept attracting market interest. The Shanghai B Share Index rallied 8% to 357.14 on top of the 6.4% gain on Wednesday, and Shenzhen B shares added 2.8% to 767.72 after advancing 1% in the previous session. Guangxi Hechi Chemical gained the daily 10% limit, and Guangxi Guidong Electric Power also rose 10%.

Other markets which ended higher were the Australian S&P/ASX 200 which added 1.1% to close at 6,365.90, South Korean Kospi which closed 0.9% higher at 1,615.58, and the Singapore Straits Times Index which rose 0.7% to end at 3,525.51. Taiwan Weighted Index advanced 0.6% to 8,037.96.


[R]8:00AM Hewlett-Packard posted 27% quarterly increase on 13% sales growth.[/R]
Hewlett-Packard Co. ((HPQ)) reported later Wednesday underlying quarterly profit growth of 27%, helped by broad cost cutting and strength in its personal computer and printer businesses. Hewlett-Packard said net income was $1.78 billion, or 65 cents per share, vs. $1.90 billion, or 66 cents per share, including a tax settlement gain of 15 cents. Second-quarter revenue for HP''s rose by 13% to $25.5 billion. Company’s CEO said the revenue growth was its strongest since 2000 and HP continued to gain share in a number of markets.

Revenue in HP''s personal systems group rose 24% to $8.7 billion and operating profit was $417 million, or 4.8% of revenue, versus 3.6% a year ago. In imaging and printing, revenue rose 6% to $7.2 billion. Operating profit was $1.2 billion, or 16.3% of revenue, up from 15.5% a year ago. HP''s software business grew 58% to $523 million, led by strong growth from Mercury Interactive. Operating profit was $42 million, or 8% of revenue, up from 0.9% of revenue a year ago.

HP projected Q3 revenue of $23.7 billion to $23.9 billion, and narrowed its forecast range for Q3 earnings per share to 64 cents to 65 cents from a prior 63 cents to 65 cents. HP added that third-quarter results would exceed analyst estimates at the time.


[R]8:00AM NY-7:00PM Mumbai Sensex surges Thursday on banks, Reliance Industries.[/R]

The Sensex on BSE finished Thursday 1712.40 points, or 1.22%, higher at 14,299.71.

The market-breadth turned negative in late session. For 1,272 stocks that advanced, 1,337 declined and only 76 stocks remained unchanged. Of the 30 stocks in the Sensex, 27 advanced, while three declined. The turnover on BSE was Rs 5,715 crore, compared to Rs 5,178 crore on Wednesday. On NSE, the turnover was Rs 12,372.07 crore, much higher than Rs 10,684.34 crore on Wednesday.

Economic news

Information and Broadcasting Minister P R Dasmunsi said in the Parliament proceedings that license of cable operators will be cancelled if they charge for cable services mandated by the government.

Private GSM mobile telephone operators are opposing telecom regulator TRAI''s recommendation to allow Internet telephony to Internet Service Providers on the grounds that this will lead to an unauthorized entry for voice telephone services.

Trading highlights

Unitech was the most-active stock with a turnover of Rs 247 crore followed by new issue Bhagwati Banquets and Bajaj Auto.

Advancers

SBI soared over 3% to Rs 1,328 aided by its plans to consolidate ownership in associate banks, dilution of stake in unlisted associates, and a further dilution of its holding in the already listed arms to strengthen its resources.

Other shares from banking and financial sector including ICICI Bank advancing 1.8% to Rs 936, HDFC gaining 0.44% to Rs 1,705 also took part in the rally. These shares have been consistently gaining in the past few days, supported by market rumors of a reduction in the cash reserve ratio.

Reliance surged 3% to Rs 1,685. It also hit a record high of Rs 1,688.15 in late afternoon session of trade. The stock saw sustained buying interest after it found natural gas in the Krishna-Godavari basin and Gujarat-Saurashtra basin on May 12 2007.

Other gainers included Dr.Reddy''s and Tata Motors which rallied around 2% each to Rs 678, Rs 751, respectively.

Decliners

Bajaj Auto declined 6.7% at Rs 2,500. Bajaj Auto posted today a 13% rise to Rs 1,248.28 crore in consolidated income in the 2007 fiscal year compared with Rs 1,104.60 crore in 2006 fiscal year. Bajaj Auto reported profit after adjustments of Rs 308.31 crore in the current fiscal year lower than Rs 346.97 crore in the same period a year earlier. Total income increased to Rs 2,471.25 crore from Rs 2,268.95 crore in a year earlier. The board has recommended a dividend of Rs 40 per share for the 2007 fiscal year.

The other two large-cap decliners were Hindustan Lever, down 1.1% to Rs 195 and Cipla, off 0.7 to Rs 208.


[R]6;30AM European markets gain Thursday on takeover speculation.[/R]

European markets advance on Thursday. The U.K. FTSE 100 rose 0.3% to 6,578.30, the German DAX 30 rose 0.5% to 7,519.75 and the French CAC 40 improved 0.4% to 6,043.02.

Advancers

Prudential gained 1.5% as the insurer was due to hold its annual meeting. Prudential has already sold its Egg online banking unit to Citigroup but fund-management group Hermes has asked for a break-up, and the decision by rating concern Moody’s to put a negative outlook on its U.K. arm will raise the pressure on the company.

Old Mutual rose 1.8% after Deutsche Bank upgraded the Anglo-South African company to buy from hold. Emap rallied 4.2% after Tom Moloney, its chief executive, resigned. The company reiterated its earnings outlook for the year.

Cairn Energy, an oil explorer in India, gained 4.1% as a bid could be imminent. Cairn spokespeople could not be reached for comment.

British Airways climbed 2.2 % after Goldman, Sachs & Co. commented that third-largest airline was the jewel in the crown for private equity investors.

Decliners

BT Group declined 1% after the U.K. fixed-line operator reported a 10% increase in adjusted profit before tax and a below-forecast 3% rise in quarterly revenue. BT also announced it would buy back 2.5 billion pounds of shares and lift its dividend 27%.

SABMiller shed 0.3% lower after the brewer posted a 14.5% annual profit rise. In North America, operating profit dropped 17% to $375 million due to rising commodity costs, declining Miller Lite volume, and price competition in the economy segment.

Sainsbury dropped 0.9% after JPMorgan Chase & Co lowered its recommendation for the third-largest supermarket chain in the UK to underweight from neutral.

Commodities

Crude oil for June delivery rose 45 cents, or 0.7%, to $63 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Brent crude oil for July settlement rose 77 cents to $68.78 a barrel in electronic trading on the ICE Futures exchange.

Gold traded in London at $663.20, down from $666.40 late Wednesday. Silver opened in London at $12.84, down from $13.05.

Currencies

The dollar was mixed against other major currencies in European trading Thursday morning. The euro traded at $1.3526, up from $1.3520 late Wednesday in New York. The British pound traded at $1.9773, down from $1.9781. The dollar fetched 120.96 Japanese yen, up from 120.74.