Citi Net Drops 57%, Danaher Buys Tektronix

123jump.com Staff
15 Oct, 2007
New York City

In the early trading in New York stock are trending lower after earnings from Citigroup and Eaton Corp. Citigroup reported third quarter earnings per share of 47 cents compared to $1.01 a year ago and Eaton Corp reported earnings of $1.71 compared to $1.62. Danaher offered $2.8 billion for Tektronix, 34% premium on closing price on Friday. India, Hong Kong, and Shanghai surged. European markets trend lower. Philips Electronics earnings dropped 80%.

[R]10:00AM New York – Stocks at the opening decline on lower than expected earnings from Eaton and Citigroup.[/R]

Stocks in the early trading in New York were mixed after earnings report from Citigroup and Eaton Corp.

Dow Jones Industrial Average was down 11 to 14,080, Nasdaq edged lower by 1 to 2,804, and S&P 500 inched lower by 1 to 1,560.

Citigroup ((C)) reported third quarter earnings decline of 57%. The revenue in the quarter rose 5.8% to $22.7 billion, earnings fell 57% to $2.38 billion from $5.51 billion, and earnings per share dropped to 47 cents from $1.10 a year ago.

Results include a $729 million pre-tax gain on the sale of Redecard shares. Return on equity was 7.4%. On October 1, 2007, Citi announced that it expected third quarter 2007 net income to decline in the range of 60%, subject to finalizing third quarter results.

Analysts in the survey conducted by 123jump.com were looking for earnings between 44 cents and 49 cents per share.

Revenues were up 6%, led by 30% growth in international revenues. Global consumer revenues increased 14%, driven by international consumer up 35%, which included a $729 million pre-tax gain on the sale of Redecard shares. Excluding the gain, international consumer revenues increased 21%, reflecting deposit and loan growth of 18% and 29%, respectively, and higher investment sales, up 26%. U.S. consumer revenues were flat with the prior-year period as deposit and managed loan growth of 16% and 8%, respectively, was offset by lower securitization results in cards and the absence of gains on sale of securities in the prior-year period in consumer lending.

Markets & banking revenues declined 24%, reflecting record transaction services revenues, up 38%, offset by a 44% decline in securities and banking. Securities and banking revenues declined due to write-downs of $1.35 billion and losses of $2.2 billion related to dislocations in the mortgage-backed securities and credit markets.

JP Morgan and Bank of America are scheduled for earnings report on Wednesday and Thursday of this week respectively.

Eaton ((ETN)) reported third quarter net income of $1.71 per share, 6% increase compared to $1.62 per share on revenue increase of 7% to $3.3 billion. Earnings increased 4% to $258 million from $248 million.
Net income in both periods included charges related to the integration of acquisitions. Before these acquisition integration charges, operating earnings per share in the third quarter of 2007 were $1.79 versus $1.65 in 2006, an increase of 8 percent. Included in the third quarter results was a gain from discontinued operations of $0.12 per share, which compares to a gain of $0.24 per share in the third quarter of 2006. Without those gains, operating earnings per share in the third quarter 2007 were $1.67 versus $1.41 in 2006, an increase of 18 percent.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “ Sales growth of 7 percent in the quarter consisted of 1 percent from organic growth, 3 percent from acquisitions, and 3 percent from exchange rates.”

He further added that “due to the economic uncertainties triggered by the late summer turmoil in global credit markets, we believe that our overall markets in the fourth quarter will not improve as we had earlier anticipated. While the non-residential electrical, power quality, aerospace, and Brazilian vehicle and agricultural equipment markets remain strong, the NAFTA heavy-duty truck market is not rebounding as we had expected and the greater weakness in U.S. housing starts is negatively impacting our residential electrical, hydraulics construction equipment, and NAFTA automotive businesses. In light of the conditions in our end markets, we anticipate that our sales in the fourth quarter will be about the same as in the third quarter.”

The company now estimates that net income per share for the fourth quarter of 2007 will be between $1.60 and $1.70, and for full year 2007 we are narrowing our guidance for net income per share to between $6.50 and $6.60. Operating earnings per share, which exclude charges to integrate our recent acquisitions, are anticipated for the fourth quarter of 2007 to be between $1.65 and $1.75, with operating earnings per share for full year 2007 to be between $6.75 and $6.85.

[R]6:00AM New York, 7:00PM Tokyo – Shipbuilders, trading houses, and mining and mineral companies led the gainers in Tokyo trading. Nomura reported a first quarterly loss in four years.[/R]

Stocks in Japan closed higher after dropping at the opening.

In Tokyo trading Nikkei 225 gained 0.16% or 26.98 to 17,358.15, while the broader Topix Index slipped 0.12% to 1,657.44. Of the Nikkei 225 stocks 107 gained, 97 fell and 21 were unchanged. Advantest Corporation led the gainers with a rise of 6.35%.

In the first section of the Tokyo Stock Exchange 7.6 billion shares valued at 1.05 trillion yen were traded and 539 million shares valued at 6.8 billion shares traded in the second section.

The Bank of Japan governor Toshihiko Fukui said today that Japan’s economy would continue expanding moderately buoyed by export shipments and corporate investment. Fukui added that the bank will closely monitor developments in the global financial and credit markets.

Economists are still looking for a moderate economic expansion in the second half the year as companies in Japan increase industrial production by 3.4% and household spending, though weak, increased at 1.6%.

Bank of Japan Regional Economic Report released today after the quarterly meeting of the nine regional branch managers of the Bank of Japan noted that the export sector is expanding and business fixed investment was rising in all regions.

According to the report, private consumption was steady with rising employment and household income on the upside. However, housing investment has plummeted as enforcement of the Building Standard Law had prompted a delay in housing starts.

Kanto-Koshinetsu, Tokai and Kinki and Hokuriku regions said economic activity was expanding gradually.

The Nikkei newspaper reported today that Mitsui Mining & Smelting Co and Nippon Mining & Metal Co. will spend 200 billion yen to develop the largest non-ferrous metal mining project in copper mines in Chile and Peru through 2011. The largest investment by a Japanese company in the region will help Japanese companies to secure a stable supply of copper and other non ferrous metals.

Separately, Gold Japan crossed the 3,000-yen per gram mark for the first time in 23 years, soaring to 3,003 yen per gram.

Of the Nikkei 225 index shares Advantest Corp led the gainers with a rise of 6.35%, followed by gains of 4.71% in Sanyo Electric, 4.69% in Sapporo Holdings, 4.71% in Mitsui Mining & Smelting Company and 3.76% in Fuji Electric.

Tokyo Electron gained as well after a brokerage raised its price estimate and Advantest jumped on the expectations of improved climate for tech spending.

Shinsei Bank Limited led the decliners in the index shares with a fall of 5.54%, followed by losses of 3.68% in Mitsubishi UFJ Financial Group, 2.62% in TDK, 2.20% in Clarion Company Limited and 2.09% in Hitachi Zosen.

Shipbuilders rose as well on firming freight charges and reports that the freight derivatives market is set to hit a record $150 billion in value, a 200% increase from last year. Freight charges are being driven largely by shipments of raw materials to China. Mitsui Engineering & Shipbuilding Company gained 2.43% while Mitsui O.S.K. jumped 2.12%.

Financial stocks declined on the worries that subprime lending losses to the U.S. borrowers are likely to hurt profitability. Mizuho Financial Group shed 1.77% and Sumitomo Mitsui Financial Group slipped 0.65%.

Nomura Holdings Inc said today it will exit the U.S. residential mortgage-based securities and cut its workforce in the U.S. by 31% from 1,300 to 900. Restructuring charges and losses from its residential-based securities will result in a group pre-tax loss of between 40 and 60 billion yen for the July and September period.

Nomura, according to the statement filed with the Tokyo Stock Exchange will take a charge of 73 billion due the U.S. mortgage securities and an additional charge of 15 billion to eliminate 31% of the staff.

Nomura fell 10 yen at the close of trading to 2,080 yen.

The yen traded at 117.64 from 117.65 to the dollar and was quoted at 167.38 from 167.39 against the euro.



The regional economic review from the Bank of Japan as published on the web site. The link to the page on the bank’s site is:

http://www.boj.or.jp/en/type/ronbun/chiiki_rep/chiiki0710.htm

October 15, 2007
Bank of Japan

According to reports from each of the nine regions in Japan, the economy as a whole expanded moderately as most regions remained on an expansion or recovery trend, although there were regional differences.

Specifically, the corporate sector remained buoyant as exports continued to increase, business fixed investment continued to be on an increasing trend in all regions, and business sentiment remained generally favorable although it had become somewhat cautious. In the household sector, private consumption was steady, with employment and household income on an increasing trend. Housing investment, however, had dropped recently in all regions, mainly due to the delay in construction starts affected by the enforcement of the revised Building Standard Law. Against the background of the increase in domestic and external demand, production was on an increasing trend.

Assessments showed that regional differences remained: Kanto-Koshinetsu, Tokai, and Kinki described their economic activity as expanding, while the other regions described it as being on a recovery trend or flat.

Compared with the assessment in July 2007, at the time of the last branch managers'' meeting, six out of nine regions maintained their previous assessment. Hokkaido, Kinki, and Kyushu-Okinawa revised their assessments slightly downward: Hokkaido indicated a standstill in the recovery of production; Kinki reported a decrease in housing investment and a slight deceleration of growth in private consumption; and Kyushu-Okinawa pointed out a decrease in housing investment and the emergence of some cautiousness in business sentiment, mainly in manufacturing.