Dell Disappoints

Elena
01 Nov, 2005
New York City

Asian markets closed mostly higher, led by Kospi, up 2.7%, followed by the Nikkei, up 1.9%. European stocks consolidated at mid-day on weaker automakers and oil stocks, as well as warning from Dell. The computer giant released lowered preliminary Q3 earnings outlook and revenue far below projections, citing sales decrease. Procter&Gamble and Colgate-Palmolive Co released third-quarter profit rise, beating and in line with estimates respectively.

U.S. MARKET AVERAGES

U.S. stock futures are trading mixed, pointing to a lower market opening after several straight sessions of advance, sending major averages to multi-week highs. The market sentiment is overweighed by weakness in tech stocks, pressured by disappointing preliminary third-quarter results from computer giant Dell, which fell 5.6% after the closing bell Monday. The company released lowered earnings forecast on sales decrease as well as revenue outlook far below expectations.

The Fed Reserve meeting outcome is also heavily weighing on investors’ minds. The central bank’s latest interest-rate announcement is due later in the afternoon with expectations of another 25-basis-point rate hike.

S&P 500 futures were down 1.9 points, below their fair value. Dow Jones industrial average futures were up 30 points, while Nasdaq 100 futures were down 6.5 points.

On the earnings front, consumer goods retailer Procter&Gamble ((PG)) reported Q3 income rise of 77 cents a share, vs. 70 cents a share a year ago on 8% revenue growth, beating estimates by a penny. Colgate-Palmolive ((CL)), consumer products maker, released Q3 profit of 67 cents per share against 58 cents last year, in line with expectations. CMS Energy ((CMS)), energy services company, posted Q3 loss of $1.21 a share, vs. a profit of 34 cents a year ago, despite a revenue growth.

In takeover news, defense contractor Lockheed Martin Corp. ((LMT)) and three private equity firms are considering a bid for Computer Sciences Corp. ((CSC)), a technical services provider, according to a report in the Wall Street Journal.

INTERNATIONAL MARKETS NEWS

Asian-Pacific Benchmarks ended mostly higher, awaiting the U.S. Fed Reserve decision on interest rate, expected to be increased by a quarter of a percentage point to 4%. In Japan trading in stocks and convertible bonds was suspended because of a computer glitch, but when trading was resumed at mid-afternoon, the Nikkei jumped 1.9%, reaching a four-year peak. Other regional gainers were South Korea’s Kospi, up 2.7% and Hong Kong’s Hang Seng, up 1.3%. Shanghai closed down.

European markets traded below the flat line at mid-day, reflecting weaker automakers and oil stocks, lowered earnings outlook from computer giant Dell, and also awaiting the U.S. Fed Reserve decision on interest rate hike. The German DAX 30 declined 0.4%, the French CAC 40 lost 0.2%, and London’s FTSE 100 fell 0.2%.

ENERGY, METALS, CURRENCIES

Crude oil futures further declined below $60 a barrel on broad-based selling of oil stocks, caused by warmer weather forecasts. U.S. light sweet crude December delivery fell 15 cents to $59.61 on the Nymex. Heating oil slipped to $1.8180 a gallon, while gasoline slightly rose to $1.5950. London Brent lost 14 cents to $57.86 on London’s ICE Futures Exchange.

Gold traded mixed in Europe. In London gold was fixed at $465.55 bid per troy ounce, up from $465.40. In Zurich the precious metal traded at $465.48, down from $465.60. In Hong Kong gold prices fell $6.30 to close at $465.95. Silver opened at $7.54, down from $7.63.

The U.S. dollar traded mixed against major currencies ahead of U.S. Fed Reserve decision on interest rate. The dollar rose to a two-year high against the yen, trading at 116.50, up from 116.35. The euro was quoted ar $1.2088, up from $1.1984. The British pound stood at $1.7696, up from $1.7985.

EARNINGS NEWS

Colgate-Palmolive Co ((CL)), maker of consumer products, reported a Q3 profit of 67 cents per share, up from 58 cents a share in the year-ago period on stronger sales and the benefits of a restructuring program, in line with analyst expectations of 67 cents per share.

Viacom Inc. ((VIA)), media conglomerate, posted a Q3 net income of 45 cents per share, up from a loss of 28 cents per share in the same period last year on 10% revenue growth. If not for special items, the profit of 47 cents per share tops analysts'' forecasts of 45 cents per share.

Entergy Corp ((ETR)), electric power production company, reported Q3 net income of $1.65 a share, up vs. $1.22 a share in the year period on revenue growth and especially on higher usage of air-conditioning linked to unusually warm weather, beating analysts'' estimate of $1.58 a share. The company added that it continues to target annual earnings growth in the 5% to 6% range but that it is unable to affirm its 2005 outlook due to the impact of recent hurricanes.

Procter & Gamble ((PG)), consumer goods retailer, reported Q3 earnings of 77 cents a share, up from 70 cents a share a year-earlier, beating analyst estimate by a penny. Sales rose 8% in Q3. The year-ago results include a gain of 3 cents a share from a unit sale. P&G envisages earnings of 66 to 69 cents a share in the December quarter, including Gillette''s operations, with sales growth of 23% to 26%.

TRW Automotive Holdings Corp.((TRW)), automotive systems supplier, reported quarterly earnings or 10 cents a share, down from 13 cents a share in the year-earlier period despite 6.5% revenue growth, topping analysts’ forecasts of 2 cents a share. Debt rose from the previous quarter on the impact of seasonal factors. The company predicts Q4 earnings of 23-38 cents a share.

CMS Energy ((CMS)), energy services company, posted Q3 loss of $1.21 a share, down from a quarterly profit of 34 cents a share in the year-earlier period despite revenue growth. After breaking out a charge of $385 million for higher natural gas costs at its Midland Cogeneration plant, CMS stated earnings totaled 54 cents a share, up 11 cents a share in the year-ago period, beating on that basis analyst estimate of of 16 cents a share.

Valero LP((VLI)), crude oil operator, reported record Q3 net income of 88 cents a unit, up from net income of 78 cents a unit earned a year earlier, beating analysts’ forecasts of 80 cents a unit. Q3 included 9 cents a unit for discontinued operations.