Aracruz Plunges 15%, Compass Mineral Soars

123jump.com Staff
03 Oct, 2008
New York City

Regional banks and insurance companies rally on the hopes of bank bailout bill passage in the U.S. House. Wachovia surges on a higher bid from Wells Fargo. Penn National lowers revenue and earnings outlook.Compass Minerals soars on a ratings upgrade from JP Morgan.

[R]12:12PM – Regional banks and insurance companies rally on the hopes of bank bailout bill passage in the U.S. House. Wachovia surges on a higher bid from Wells Fargo. Penn National lowers revenue and earnings outlook.[/R]

Aracruz Cellulose SA ((ARA)) plunged 15.2% or $4.85 to $26.41 after it reported its currency derivative exposure is worth negative $1.02 billion. The company, primarily exports paper pulp and paper products that are priced in the U.S. dollar has 15% of its debt in dollar and 75% ifs production cost in Brazilian reais. The company maintains a hedge position to protection from future gains in Brazilian currency.

The company maintains a long position in dollar futures at the BM&F in the order of $538 million, currently with an average exchange rate of R$1.91/$1.00. The company also has a short position of US$140 million in non-deliverable forward contracts, with a maturity in November 2008, against a long position of $60 million, with a maturity in October 2008.

The company maintained $620 million in cash position and values its currency contract on a monthly basis. The negative value of the current derivative contract will have an accounting impact but cash impact for the third quarter will be positive $20 million.

Compass Minerals ((CMP)) surged 17.3% or $7.21 to $49.49 after it was upgraded by JP Morgan. The company less than a month ago announced price increase for its deicing products of $175 a ton on potassium based water conditioning products. The company makes inorganic minerals including sulfate of potash specialty fertilizer and magnesium chloride and is also known for its deicing products for highway and aviation markets.

General Growth Properties ((GGP)) soared 42.8% or $3.24 to $10.83 after it fired its chief financial officer Bernard Freibaum and appointed interim chief finance officer Edmund Hoyt. The company also suspended its dividend. Mr. Freibaum informed the company that he has sold 2.95 million shares of the company to satisfy margin calls and still has $3.4 million of margin debt and holds 1.3 million shares.

KVH Industries, Inc ((KVHI)), the maker of mobile antenna for satellite and navigation systems plunged 10.8% or 91 cents to $7.49 after it lowered its third quarter revenue and earnings outlook. The company now expects revenue to be in the range between $15.6 million and $16 million compared to earlier guidance between $19 million and $20.5 million. Earnings in the quarter are likely to be below previous guidance of 1 cent and 5 cents.

Penn National Gaming Inc ((PENN)) plunged 10.3% or $2.37 to $21.00 after it lowered its operating earnings and revenues for the third quarter. The company revised the quarterly revenue to $617 million from $657 million and EBITDA earnings to $146.3 million from $178.6 million. The company blamed the lower revenue on weather and weaker economic conditions.

Resource Connection, Inc ((RECN)) dropped 6.5% or $1.31 to $18.81 after it reported revenues gain of 6.8% to $207.3 million and net income rise of 7.8% to $12.5 million or 27 cents from $11.5 million or 23 cents a share. The U.S. revenues were flat and international revenues rose 26.5% or 17.4% on a constant currency basis.

Regional banks rallied after the U.S. House crossed a procedural hurdle to vote on the amended bank bailout approved by the Senate. Regions Financial ((RF)) surged 16.5% or $1.98 to $13.83, SunTrust Banks ((STI)) gained 6.9% or $3.52 to $54.69 and Fifth Third Bancorp ((FITB)) added 4.20% or 56 cents to $13.91.

Wachovia Bank ((WB)) surged 75% or $3.10 to $7.01 and Wells Fargo (WFC)) rose $3.59 to $38.75. Citigroup Inc ((C)) dropped $2.85 to $19.75. After the close of the bidding process conducted by the Federal Deposit Insurance Corporation for the transfer of Wachovia Corporation, Wells Fargo proposed the revised bid. The banks of both banks agreed to the new proposed bid from Wells Fargo, but it is not clear what has happened to the merger agreement with Citigroup.