Auto and Housing Stocks Fall

Elena
08 Nov, 2005
New York City

Auto parts maker Visteon caused concerns over the automotive sector, reporting third-quarter narrower loss of $1.58, but missing analyst expectation of a more modest loss. Home builder Toll Brothers is another disappointment of the day as the company projected lower sales and profit for the following year.

U.S. MARKET AVERAGES

Stock markets opened lower on profit-taking due to concerns over the lagging automotive and housing sectors. Disappointing forecasts from auto parts maker Visteon Corp. dragged down the auto sector, while investors worried about a softening housing market after luxury home builder Toll Brothers announced record fourth-quarter revenue, but lower sales and profit guidance for the following year.

The housing sector has sharply declined by 4.7%, hurt by the lowered guidance from Toll Brothers ((TOL)). The tech sector is weaker as well, with networking and disk drive stocks moving lower.

With its modest advance, the gold sector is one of the few sectors moving to the upside. The drug and biotech sectors are sitting near the flat line.

Energy stocks have rebounded from early losses and the group is now in the positive territory, with modest gains in the oil and oil service sectors.

Abatix ((ABIX)) is one of the biggest percentage gainers in the early going, climbing by 34% on third-quarter earnings increase.

NetEase.com ((NTES)) is one of the morning's worst performers on guidance included in its quarterly profit statement. The stock is currently down 20%.

On the corporate news front, Linens ''n Things ((LIN)) announced that it has agreed to be acquired for $1.3 billion by a newly-formed company controlled by Apollo Management, L.P. Thedeal will likely close in the first or early second quarter of 2006.

Lehman Brothers lowered its rating on LSI Logic Corp. ((LSI)), a maker of microchips used in products like DVD recorders, to ‘equal-weight’ from ‘overweight’.

In the first hour of trading, the Dow Jones industrial average fell 53.94, or 0.51%. The Standard & Poor''s 500 index dropped 4.15, or 0.34%, and the Nasdaq composite index lost 6.96, or 0.32%.

Bonds rose as stocks slipped, with the yield on the 10-year Treasury note falling to 4.59% from 4.63% late Monday.

MOVERS AND SHAKERS

Investor Icahn revealed that he and affiliates control 9.3% of Fairmont Hotels & Resorts ((FHR)). Icahn urged Fairmont to seek strategic options, including a sale of the company or some of its hotels and other assets, declaration of a dividend, or execution of a stock buyback. Fairmont gained 3.5%.

Toll Brothers ((TOL)) lowered its forecast for homes to be delivered in 2006, pointing a harder regulatory environment, community-opening delays and softening demand in some markets. The company’s stock dropped almost 11%.

The aluminum producer Alcan ((AL)) reported a decrease in third-quarter net income, because of seasonal lull and the loss of some product categories due to the spinoff of its ex-unit Novellis ((NVL)). Alcan’s stock dropped 0.3%.

The fast food retailer McDonald''s ((MCD)) announced its worldwide same-store sales increased 3.4% in October, with U.S. same-store sales achieved a 3% growth. McDonald''s stock is likely to gain today.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mixed with the Nikkei falling 0.2% on declining oil prices which sent oil companies lower and on banking shares sell-off. Awaited economic data later in the week also weighed on sentiment. Among the regional gainers, Hong Kong’s Hang Seng rose 0.3%, South Korea’s Kospi gained 0.7%, and Australia’s All Ordinaries climbed 0.9%.

European markets advanced at mid-day on the back of strong automakers, boosted by weaker oil and rising mining stocks, supported by a rally in Japanese steel shares. Market was also given a lift by solid corporate earnings with Sanofi-Aventis one of the leading gainers. The German DAX 30 added 0.1%, the French CAC 40 gained 0.5%, and London’s FTSE 100 rose 0.3%. The euro was at a two-year low vs. the dollar, at $1.1725.

OIL, METALS, CURRENCIES

Crude oil prices hovered near $59 a barrel on unusually warm weather for the season, reducing consumers’ need for heating fuel. Light sweet crude December delivery fell 23 cents to $59.29 a barrel in electronic trading on the Nymex. London Brent lost 43 cents to $57.61.

Gold traded in a mixed fashion in Europe. In London the precious metal was fixed at $457.15 per troy ounce, up from $456.50. In Zurich gold fell to $457.45 from $457.65. In Hong Kong gold fell $0.10 to close at $457.35. Silver opened at $7.51, up from $7.46.

The U.S. dollar further strengthened against its major counterparts. The euro was quoted at $1.1736, down from $1.1793. The dollar bought 117.77 yen, up from 117.62. The British pound traded at $1.7353, down from $1.7434.

EARNINGS NEWS

Watson Wyatt & Co. ((WW)), consulting firm, announced Q1 profit from continuing operations rose 1% to 36 cents a share compared with the year-ago quarter. Revenue soared 52%. The company raised its fiscal-year earnings outlook to the range of $1.74 to $1.76 a share up from an earlier guidance of $1.67 to $1.69 a share.

Western Gas Resources Inc. ((WGR)), natural gas systems & facilities operator, announced Q3 net income of 88 cents a share, almost double the 47 cents a share in the same period last year on revenue growth and stronger volume and prices, beating analyst estimate of 74 cents a share.

Church & Dwight ((CHD)), household products company, reported Q3 net income of 51 cents a share up from 42 cents a share in the year-ago period on 5% sales growth, beating analysts’ expectations of 45 cents a share. The company expects damage caused by the summer''s hurricanes to cut 6 to 7 cents off Q4 earnings although it still expects 2005 earnings of $1.75 a share.

Visteon Corp. ((VC)), auto parts maker, reported Q3 loss narrowed to $1.58 a share, from $11.48 a share despite 0.4% revenue decline, missing analyst estimate of $1.34 a share. The company''s attributed its narrower loss the lack of $1.3 billion in charges over deferred tax asset valuations and asset impairments, and the company highlighted a growing proportion of revenue coming from outside of Ford Motor Co.

Magna International Inc. ((MGA)), automotive systems supplier, announced Q3 net income advanced to $1.44 a share, up from $1.37 a share in the same period last year on 12% revenue growth. North American vehicle production rose 2% and European vehicle production went down 6%, it said. The company sees lower earnings per share in 2005 excluding items on sales between $22.3 billion and $22.9 billion.

Sanofi-Aventis ((SNY)), French drugmaker, posted a 28.7% increase in adjusted net profit at 1.92 billion euros, with sales up 11.6% to 7.2 billion euros. Generic competition hurt Allegra sales by 0.4% in Q3 at constant rates, but top drugs Lovenox and Plavix had sales growth of 13.8% and 22.8%, accordingly. Sanofi-Aventis reaffirmed its forecast of at least 20% earnings per share growth for 2005.

51job Inc. ((JOBS)), Chinese HR company, reported that Q3 net income dropped 29% to 7 cents per U.S. listed share, on a foreign currency translation loss, with revenue rising 21% to RMB161 million ($19.9 million). The company’s adjusted earnings of 12 cents per U.S. share as well as its revenue topped analyst estimate.

Princeton Review Inc. ((REVU)), print and online products manufacturer, posted Q3 net income of 4 cents a share, up from a year-ago loss of 2 cents a share on changes in operations and new personnel and on 18% revenue growth.

Cincinnati Bell Inc. ((CBB)), telecommunications equipment and services provider, stated that it reversed to a Q3 loss of 19 cents a share, down vs. a net profit of 6 cents in the year-earlier period on 2% lower revenue, missing analyst estimate of 5 cents a share. Excluding a $92 million pretax loss to extinguish debt earnings amounted to 3 cents a share.

Landry''s Restaurants ((LNY)), restaurants operator, posted Q3 earnings of 73 cents a share, down from 74 cents a share in the same period a year ago despite revenue growth, a missing analyst estimate by a penny. Same-store sales declined 0.9%.

Young Broadcasting Inc. ((YBTVA)), television stations operator, reported that Q3 loss almost doubled from year ago levels to $1.03 a share from 61 cents a share a year ago on revenue decline.

Cablevision Systems Corp. ((CVC)), cable television systems operator, announced that its Q3 loss went slightly down to $62.9 million, or 22 cents a share, from $63.2 million, or 22 cents a share in the same period last year, missing analyst estimate of a loss of 8 cents a share. Revenue increased 11.2%.