U.S. Stocks Rise, IBM Repurchase

123jump.com Staff
26 Feb, 2008
New York City

U.S. stocks edged higher in a cautious trading as investors digested several economic news and earnings. Home prices index measuring home prices in top 20 metropolitan areas registered a sharp fall of 9% across the nation. The sharpest decline in years suggested that housing market reovery may take longer than anticipated. Consumer confidence fell in February and a measure of wholesale price index rose more than expected in January. Earnings from Home Depot missed analysts projections.

[R]11:30AM New York – IBM repurchase of $15 billion and better than expected earnings from Macy’s, Nordstrom, and AutoZone lifted market averages.[/R]

U.S. stocks traded in a tight range with a mild upward bias after the release of data on producer price index, consumer sentiment, home price index, and weak earnings from home Depot but stronger than expected earnings from Nordstrom, Macy’s and Autozone.

Home Price index, S&P – Case Shiller index in January suggested one of the sharpest declines in home prices across top 20 metropolitan areas. Miami led the decline in with a plunge of 18% in 2007 followed by sharp plunge of 15% in Las Vegas and Phoenix. Seven of the top 20 metros registered a double-digit decline and 17 of 20 cities reflecting a loss in home values in 2007.

Separately RealtyTrac, home foreclosure tracking firm, reported that filings surged 57% in January from a year ago and 8% from December.

Producer Price Index, a measure of wholesale inflation, as reported by the Labor Department rose 1% in January. The inflation, excluding food and energy rose 0.4% from a year ago, sharply higher than the economists forecast. Consumer Confidence index in February declined sharply to 75 from a revised 87.3 in January.

IBM Stock Buyback

IBM board authorized $15 billion in additional funds for use in the company’s stock repurchase program. This amount is in addition to approximately $0.4 billion remaining at the end of February from a prior authorization. With this new authorization, IBM will have approximately $15.4 billion for its stock repurchase program. IBM said it expects to spend up to $12 billion on stock repurchases in 2008.

In January, the company said it expected 2008 full-year earnings per share of $8.20 to $8.30. Today, IBM said the anticipated share repurchase activity could add up to $.05 to 2008 full-year earnings per share. The company now expects full-year 2008 earnings per share of at least $8.25, or year-to-year growth of 16%.

Earnings Update

Home Depot reported 27% decline in net income after its largest rival Lowe’s reported a fall of 33% in earnings yesterday. Home Depot ((HD)) earnings declined in the fourth quarter to $671 million or 40 cents per share compared to $925 million or 46 cents per share a year ago.

Revenue in the quarter rose 1.5% to $17.66 billion, but adjusted for the equal number of weeks, fell 4.7% and same-store sales fell 8.3%. Home Depot stock edged 8 cents higher to $28.88.

On Monday Lowe’s ((LOW)) reported earnings of $408 million or 28 cents per share compared to $613 million or 40 cents per share a year ago on net sales decline of 0.3% to $10.38 billion and same-store sales decline of 7.6%. Lowe’s stock increased 23 cents to $24.74.

Macy''s, Inc. ((M)) today reported earnings from continuing operations of $1.73 per diluted share for the 13-week fourth quarter of 2007, ended Feb. 2, 2008 compared to $1.45 for the 14-week fourth quarter last year. Sales in the fourth quarter declined 6.2% to $8.6 billion compared to $9.2 billion from a year ago and same-store sales in the quarter declined 2%. The company shuttered 12 of its stores.

Macy’s stock rose $1.04 to $25.80.

Nordstrom, Inc. ((JWN)) today reported net earnings of $212 million, or $0.92 per diluted share for the fourth quarter ended February 2, 2008 compared to diluted earnings of $232 million and $0.89 per share.

Total sales in the fourth quarter were $2.5 billion, a decrease of 4.4% compared to sales of $2.6 billion for the same period in fiscal 2006. Fourth quarter same-store sales decreased 0.7%.

Same-store sales decreased 0.7 percent for the quarter compared to the company''s approximately flat same-store sales plan.

Nordstrom stock increased $1.23 to $38.21.