Inco to Buy Falconbridge for $11 B

Elena
11 Oct, 2005
New York City

U.S. market averages opened in the positive on the back of strong Q3 earnings reports.Alcoa reported Q3 better-than-expected earnings of 33 cents a share, beating estimates of 29 cents. Genentech, biotechnological company, announced Q3 net earnings of 33 cents a share, up from 21 cents a share last year on operating revenue growth, topping analyst estimate of 30 cents.

U.S. MARKET AVERAGES

U.S. stock markets opened higher, boosted by strong earnings reports from Alcoa and Genentech, released at the beginning of the new earnings season. The news brought relief to the traders, who have been anxiously looking for signs that higher energy costs will depress corporate earnings. The early rally on Wall Street is modest but Broad. The two major averages Dow and S&P 500 post gains over 0.4%, while Nasdaq only 0.2%.

The advance in oil prices is helping energy stocks, which are bouncing back from last week's declines. The oil service space is the leader in the group, climbing by 2.2%. The Materials sector is currently up 1%, boosted by the aluminum group which stands out as one of the brightest spots on Alcoa's earnings report. Housing stocks are also strong, rising on strong quarterly sales orders from D.R. Horton.

There are few major sectors showing losses in the early going. However, the drug sector is sitting slightly below the unchanged mark.

General Motors has risen 2.6%, rebounding from yesterday's 11%-drop on Delphi's bankruptcy. IBM is the third-best Dow component, up 2.3% on a second consecutive analyst upgrade.

Genentech Inc., the world's second-biggest biotechnology company announced Q3 56% profit rise on sales of its colon cancer drug Avastin and other products.

Dow component Alcoa Inc., the world's biggest aluminum producer, saw its shares rise 2% in after-hours trading on Monday after reporting slightly higher third-quarter net income.

Gannett, media company, posted Q3 earnings decline of $1.13 a share vs. $1.16 a year ago, despite 4% revenue growth, but meeting analysts’ estimates.

Infosys Technologies, India’s second-biggest software exporter, reported Q3 36% profit increase to $137.7 million and raised its full-year earnings outlook.

Bonds were unchanged, with the yield on the 10-year Treasury note at 4.37 percent, the same as late Friday. The Treasuries market was closed Monday for the Columbus Day holiday

Inflation may come back into focus as the Federal Reserve releases minutes from its September 20 monetary policy meeting at 2 p.m.

MOVERS AND SHAKERS

The aluminum producer Alcoa ((AA)) posted a third-quarter profit that was slightly higher than the reduced outlook it announced two weeks ago. Alcoa reported earnings of $289 million, or 33 cents a share, for the three months ended September 30, an increase from $283 million, or 32 cents, for the same period in 2004. Alcoa jumped 3.4%.

Genentech ((DNA)) gained 5.7% after the company also reported higher-than-expected third-quarter net income. The company said net income increased 56% to $359.4 million, or 33 cents a share, in the quarter ended September, compared with $230.9 million or 21 cents a share for the same period in 2004.

Fast-food giant McDonald's ((MCD)), a Dow component, added 2.5% after UBS lifted its price target for the stock by $6 to $43. The broker cited a spin-off of McDonald’s company-owned restaurants makes sense and would unlock shareholder value. The analysts are also optimistic on the company’s fundamental outlook heading into 2006.

Another Dow component, General Motors ((GM)), climbed 1.2% after the company lost 10% of its value yesterday as a result of its former unit Delphi's bankruptcy filing.

Apple Computer ((AAPL)) is going to report its earnings results after the close of trade. Analysts are expecting the company to post earnings of 37 cents a share for the quarter ended September on $3.73 billion in sales. Apple was up 1.3%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed the trading session mostly higher. The Nikkei advanced 2.5% after the long weekend, rebounding from last-week sharp declines on the back of strong bank and machinery stocks. Across the region, South Korea’s Kospi gained 1.4% on sensitive to domestic consumption stocks. Hong Kong’s Hang Seng added 0.3%, while Australia’s All Ordinaries fell 0.8%.

European markets advanced at mid-day dealings on signs of improving retail sector in the U.K. and strong earnings report from a Roche Holdings’ subsidiary Genetech. The markets shrugged off Wall Street declines overnight. The German DAX 30 added 0.7%, the French CAC 40 rose 0.7%, and London’s FTSE 100 gained 0.4%.

ENERGY, METALS, CURRENCIES

Oil prices rose over $62 a barrel on a report of the International Energy Agency, saying that fuel demand was not badly hurt and could lead to shortages during the winter.Light sweet crude for November delivery gained 87 cents to trade at $62.67 a barrel on the Nymex. London Brent added 72 cents to $59.50.

In European trading gold prices climbed near a 17-year high on higher energy costs which increased the appeal for the precious metal, seen as a hedge against the inflation. In London gold December contract traded at $475.50 per troy ounce, up from $473.60. Markets in Hong Kong were closed for a holiday. Silver opened unchanged at $7.76.

In European trading the U.S. dollar traded mixed against its major counterparts. The euro was quoted at $1.2403, down from $1.2052.The dollar changed hands at 113.89 yen, down from 114.20. The British pound was trading at $1.7553, up from $1.7537.

EARNINGS NEWS

Alcoa Inc. (AA)), aluminum producer, posted Q3 net earnings of 33 cents a share, up from 32 cents in the same time last year on revenue growth, beating analysts’ expectations of 29 cents a share.

Genentech Inc. ((DNA)), biotechnological products producer, announced that Q3 net earnings advanced to 33 cents a share, up from 21 cents a share in the same time last year on operating revenue growth, topping analyst estimate of 30 cents a share. Excluding one-time items, earnings totaled 35 cents a share.

Ault Inc. ((AULTE)), power conversion product maker, posted a Q1 net loss of 9 cents a share, down vs. a net loss of 2 cents a share in the same period last year on revenue decline.

Robbins & Myers, Inc. ((RBN)), pharmaceutical, energy, and industrial products maker, posted Q4 net income per share of 16 cents, including restructuring expenses of 10 cents per share, or income of 26 cents per share on a pre- restructuring basis. Q4 sales were $10.5 million higher than sales in the comparable period a year ago. The income per share in the comparable period last year was 24 cents.

Sycamore Networks Inc. ((SCMR)), provider of telecommunications switching technology, announced that net income for Q4 advanced to 1 cent a share, up from a loss of 3 cents in the year-ago period on revenue growth.

The Dress Barn Inc. ((DBRN)), women's apparel retailer, reported Q4 net income of $1.08 per share, up from 45 cents per share in the same time a year ago. Apart from a number of exceptional items, the company would have gained 45 cents a share, in line with analysts’ expectations. Sales advanced 48% to $307.1 million.

Gannett Co., Inc. ((GCI)), media company, posted Q3 net income of $1.13 a share, down vs. $1.16 a share in the comparable period last year despite 4% revenue growth, but in line with analysts’ forecasts. Earnings in the most recent quarter were $1.14 a share including income from discontinued operations. The company also announced September pro forma operating revenues of nearly $670 million, up 1.1%.

Helen of Troy ((HELE)), cosmetics firm, announced that Q2 net income dropped to 30 cents a share down from 57 cents a share in the year-ago period on net sales decline, missing analyst forecasts of 50 cents a share.

Temple-Inland Inc ((TIN)) announced that net income would amount to 32 cents a share for Q3, including a 13-cents-a-share charge in items, related mostly to Hurricanes Katrina and Rita, missing the analyst estimate of 42 cents per share. The company stated that hurricane damage would cut the lumber company's pre-tax income by $27 million. About $12 million of the amount will be recorded as reduced operating income, primarily in the company's corrugated packaging operation.

CORPORATE NEWS

Inco Ltd., the world's second largest producer of nickel, offered to acquire Falconbridge Ltd., one of the world's top miners and smelters of copper and nickel. in a cash and stock deal. The deal will combine two of Canada's top mining companies and form the world's largest nickel producer. Under terms of the deal, Falconbridge shareholders will receive 0.6713 Inco shares, a cash payment or a combination of shares and cash valued at 33.94 Canadian dollars ($28.80) for each Falconbridge share they own. The companies said the acquisition should lead to annual savings of $350 million per year by the end of 2007.