Energy Stocks Under Pressure

Elena
09 Nov, 2005
New York City

Federated Department Stores posted that Q3 profit jumped fivefold on large asset-sale gains, and reaffirmed its financial forecast for the fourth quarter. Pixar Animation Studios Inc reported a rise in quarterly profit and revenue above Wall Street expectations. Pharmaceutical company Bayer released strong quarterly eranings of 493 miillion euros on 19% revenue growth, beating estimates of 291 million.

U.S. MARKET AVERAGES

U.S. stock markets opened flat, ready to continue consolidating gains. Stocks keep near the flat line, deprived of energy and direction for two reasons. First, oil prices retreated ahead of weekly U.S. inventory data, expected to show an increase in crude and fuel stocks. Then, PepsiCo Inc. announced a reduction of its year-end forecast and raised further concerns among investors, already nervous about consumer spending. Besides, insurance giant American International Group said it would restate its results for three fiscal years.

Very few sectors climb or fall sharply. Gold stocks stand out among the gainers sending the sector up 1%. Airline, biotech and gaimingstocks are also moving to the upside. Retail stocks are gathering strength after yesterday’s profit-taking.

After the Senate committee hearing on oil industry profits started, energy stocks became the worst performers in the early going, though the declines in the oil, oil service and natural gas sectors remain below 1%. The disk drive space is showing weakness of less than 1%.

Internet Initiative ((IIJI)) is among the best performers in the early going, up 19% on quarterly results.

1-800 CONTACTS ((CTAC)) is one of the morning's worst performers on a third-quarter loss versus a profit last year. The stock is currently down 23%.

Federated Department Stores Inc, operator of the Macy's and Bloomingdale's department store chains, rose $2.35 to $66.26 after it reaffirmed its financial forecast for the fourth quarter and reported that its third-quarter profit climbed more than fivefold from last year, aided by a large gain from an asset sale.

Pixar Animation Studios Inc. ((PIXR)) reported Tuesday a rise in quarterly profit and revenue above Wall Street expectations. Its shares jumped 9.7% after hours on the Inet the electronic brokerage system after ending.

American International Group Inc. ((AIG)), the world''s largest insurer by market value, said it will delay the release of its third-quarter results until November 14, giving it time to correct errors.

Bonds fell, with the yield on the 10-year Treasury note rising to 4.60 percent from 4.55 percent late Tuesday.

MOVERS AND SHAKERS

The comic book licensor Marvel Entertainment ((MVL)) posted a 29% decrease in third-quarter net income and projected a sharp profit drop, within a range of $0.37-$0.52 a share, in 2006. The company’s stock lost almost 24%.

The insurer AIG ((AIG)) announced it will have to review its financial results again and will delay its 10-Q filing by five days, after finding errors that resulted in a $500 million understatement of third-quarter results. AIG will restate results for the years ended December 31, 2004, 2003 and 2002, along with selected data for 2001 and 2000 and quarterly financial results for 2004 and the first two quarters of 2005. The company’s stock fell 1.4%.

The animation studio Pixar ((PIXR)) reported quarterly earnings that came above the estimates, resulted from a higher gain from its film library. The company’s stock soared 6.3%.

Home Depot ((HD)) was upgraded by the financial broker Piper Jaffray. The company’s stock was up 1%.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks ended mixed. The Nikkei advanced 0.3% on tech stocks after three sessions of decline. The tech sector got a boost from news that Samsung Corp. would spend $45 billion on research and development in the following 5 years. Across the region, Hong Kong’s Hang Seng was the biggest gainer, up 1.4%. South Korea’s Kospi inched up 0.1%, while Australia’s All Ordinaries fell 0.6%.

European markets traded mostly lower at mid-day, hurt by weaker telecom sector with Deutshe Teliecom posting losses on earnings news and France Telecom down on takeover speculations. Solid earnings from chemicals companies, including Bayer AG, only cushioned declines. The German SAX 30 inched up 0.03%, the French CAC 40 lost 0.3%, and London’s FTSE shed 0.2%.

OIL, METALS, CURRENCIES

Crude oil prices eased back ahead of oil inventory report, expected to show an inventories increase. Light sweet crude December delivery fell 21 cents to $59.50 a barrel on the Nymex. Heating oil lost a penny to trade at $1.7647 a gallon. Gasoline slightly fell to $1.5562. Natural gas traded steady at $11.801 per 1,000 cubic feet. London Brent rose 15 cents to $57.96.

Gold prices climbed in European trading. In London the precious metal was fixed at $462.60, up from $461.30. In Zurich gold rose to $462.85 from $460.30. In Hong Kong gold gained $4.90 to close at $462.25. Silver traded at $7.61, down from $7.462.

The U.S. dollar advanced against all major currencies. The euro was quoted at $1.1755, down from $1.1785. The dollar bought 117.54 yen, up from 117.12. The British pound traded at $1.7376, down from $1.7434.

EARNINGS NEWS

Federated Department Stores Inc. ((FD)), retailer, reported that Q3 net income rose to $1.79 a share, up from 42 cents in the year-ago period, topping analyst forecast of 23 cents a share. Income from continuing operations amounted to 36 cents on an adjusted basis.

Bayer ((BAY)), pharmaceutical company, reported that Q3 net income soared to 493 million euros from 52 million euros in the same period last year on 19.1% revenue growth euros, topping analysts’ forecasts of 291 million euros. The company raised earnings expectations for the second time this year in view of its net income growth and with EBIT before special items doubling to 691 million euros. If not for special gains of 179 million euros, mostly from pension plan changes, Bayer stated that its healthcare and material science divisions had the biggest earnings contribution.

Steris Corp. ((STE)), medical products maker, announced Q2 net income dropped 13.1% to 24 cents a share on higher raw material costs and fuel prices and despite 7.4% revenue growth The company expects earnings between $1.30 and $1.34 a share on a 6% to 8% revenue rise for the fiscal year.

Marvel Entertainment Inc. ((MVL)), comic-book company, posted Q3 net income of 23 cents a share, down from 30 cents in the same period a year ago, missing analyst estimate of 30 cents a share. Sales also dropped to $81.1 million from $135.2 million, reflecting a big drop in both licensing and toy sales. The company slightly lifted its 2005 guidance to full-year earnings of $1.02 to $1.07 a share, as opposed to $1.01 to $1.06 previously.

[Foster Wheeler ((FWLT)), fuels facilities designer, posted a Q3 loss of 35 cents a share, up vs. a loss of $103.23 a share in the same period a year ago despite revenue decline. The results include a $40.2 million accounting charge. Unfilled orders advanced to $3.07 billion from $1.81 billion while new orders booked increased to $942.2 million from $280.6 million.

Mills Corp ((MLS)), real estate investment trust, reported a Q3 loss of 61 cents a share, down from a year-agonet income of 95 cents a share. The company’s funds from operations per share for Q3 were 45 cents a share, down vs. 97 cents a year before, missing on that basis analyst estimate of $1.06 a share.

King Pharmaceuticals, Inc. ((KG)), pharmaceutical products manufacturer, reported that it reversed to a Q3 profit of 50 cents a share, up from a loss of 3 cents a share in the same period last year on 31% revenue growth. If not for one-time items, the company’s earnings would have been 52 cents a share, up from 34 cents a share in the year-earlier quarter, topping analyst forecast for earnings of 33 cents a share.

Morningstar Inc. ((MORN)), a provider of independent investment research, announced that its Q3 profit soared 84% to 17 cents a share, up from 10 cents a share in the same period last year on revenue growth missing analyst estimate of 19 cents a share.

The Interpublic Group ((IPG)), advertising company, posted a narrower Q3 loss of 24 cents a share, up from a restated loss of $1.21 a share in the year-ago period despite 5.1% revenue decline.