FedEx Rises 33% in Q2

Elena
21 Dec, 2005
New York City

A raft of merger-and-acquisition news lifted market sentiment. Tech stocks gained after computer hard-drive maker Seagate said it will pay $1.9 billion in stock for rival Maxtor Corp. In earnings news, FedEx posted 33% net income rise for the Q2, well above expectations. The company lifted its full-year earnings outlook. Nike Inc reported that Q2 profit advanced 15% to $1.14 a share on 10% revenue growth, beat estimate.

U.S. MARKET AVERAGES

U.S. stock markets advanced at opening, strongly supported by a great amount of merger-and-acquisition news, robust earnings from FedEx, and upbeat third-quarter GDP data which eased inflation concerns. Each of the three major averages gained 0.5%.

The Commerce Department released a downward revision of GDP for the third quarter which showed that he U.S. economy grew at fastest pace in a year and a half. The third-quarter GDP rose at an annual rate of 4.1%, despite surging oil prices and hurricanes, following a 3.3% rise in Q2. Economists had been expecting a 4.3% increase in July –September industrial output.

Acquisitions in the technology and pharmaceutical industries promised to inject strength to lagging sectors. Google Inc., Seagate Technologies and IBM Corp. announced major purchases, while Allergan Inc. said it will buy Inamed Corp.

Allergan Inc. agreed to pay more than $3 billion for Inamed Corp., offering a deal that topped Medicis Pharmaceutical Corp.''s first bid.

Seagate Technology ((STX)) offered $1.9 billion in shares for Maxtor Corp. ((MXO)), a hard disk making rival, that values each share at a 60% premium to Tuesday''s close. This came after Google and Time Warner finally announced their AOL deal, with Google taking a $1 billion stake in the America Online unit.

Arden Realty Inc., a real estate investment trust valued at more than $3.1 billion, is near a deal to be bought by General Electric Co. and other investors.

The disk drive sector sharply rose in the early going, thanks to the $1.9 billion deal for Seagate to acquire Maxtor. Transportation stocks also advanced on strong earnings from FedEx. The Dow Jones Transportation Average rose more than 1.5%.

Very few sectors declined in early going with the semiconductor sector being the most notable loser among the laggards,despite showing only a slight decline.

In the first hour of trading, the Dow Jones industrial average rose 49.63, or 0.46%. The Standard & Poor''s 500 index climbed 4.99, or 0.4%, and the Nasdaq composite index gained 7.44, or 0.33%.

Bonds continued the previous session''s selloff, with the yield on the 10-year Treasury note rising to 4.49% from 4.47% late Tuesday.

MOVERS AND SHAKERS

Shipping company FedEx Corp reported second-quarter 33% jump in profit of $1.53 per share vs. $1.15 a year ago on 10% revenue growth, easily beating its own and Wall Street's expectations. The strong quarterly results are due to higher demand for its services and lower advertising costs. The stock rose 3.2%.

Family Dollar Stores ((FDO)) reported Q1 profit of $51.4 million, or 32 cents a share, from $54.4 million, or 32 cents, a year ago, beating estimates of 31 cents a share. Earnings per share remained flat despite the decline in net income because there were fewer shares outstanding. Sales advanced to $1.51 billion from $1.38 billion in last year's first quarter. The discount retailer forecast Q2 earnings of 45 cents to 50 cents a share and full-year earnings at $1.30 to $1.39 a share. Company’s shares rose 3.8%.

GSI Group Inc ((GSIG)), a supplier of precision motion components, lasers and laser systems said that it authorized a stock repurchase program of up to 1.5 million shares. GSI shares rose 2.9%.

Nike Inc. ((NKE)) , footwear and apparel company, reported Q2 profit rise of 15%, or $1.14 a share, up from 97 cents in the year-ago period on 10% revenue growth, beating estimates by 11 cents a share, but the company also reported a sharp slowdown in orders scheduled for future delivery. The stock dropped 5.2%.

ECONOMIC NEWS

Wednesday morning, the Department of Commerce released its final report on third quarter gross domestic product, showing that GDP growth was downwardly revised. The downward revision came as a surprise to economists.

The report showed that third quarter GDP rose at an annual rate of 4.1 percent, down from the previous estimate of 4.3 percent, although still above the 3.3 percent growth seen in the second quarter. Economists had expected third quarter GDP growth to be unrevised.

The Commerce Dept. said that the lower than previously reported growth reflected a downward revision to consumer spending for durable goods as well as several other smaller downward revisions that were partly offset by an upward revision to exports of services.

Despite the downward revision, the third quarter GDP growth remained the strongest rate of growth since the first quarter of 2004. The growth reflected strong consumer spending, equipment and software spending, federal government spending, and residential fixed investment.

However, the report also showed that the index of consumer prices excluding food and energy rose 1.4 percent in the third quarter, an upward revision from the previous estimate of 1.2 percent growth. The price growth still remained below the 1.7 percent increase seen in the second quarter.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished largely in the positive, led by the Nikkei which hit a fresh five-year high of 2.02% to 15,957.57, boosted by exporter issues like Honda Motor and other strong sectors, including the real estate sector with Mitsubishi Estates in the lead. Across the region, South Korea’s Kospi rose 1%, Hong Kong’s Hang Seng advanced 0.5%, and Sydney All Ordinaries climbed 0.9%.

European stocks advanced at mid-day trading, lifted by strong energy and metals stocks as well as corporate news from Philips Electronics. Both the German DAX 30 and the French CAC 40 broke through new highs, rising 0.5% and 0.6% respectively. London’s FTSE 100 gained 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices advanced after an attack on a pipeline and ahead of petroleum report, expected to show a decrease in oil inventories. Light sweet crude for January delivery gained 26 cents to $58.35 a barrel on the Nymex. London Brent climbed 26 cents to $50.43.

Gold traded mixed in European trading. In London gold closed at $502.10, down from $506.70 per troy ounce. In Zurich the precious metal rose to $507.30 from $506.95. In Hong Kong gold fell $2.65 to close at $505.95. Silver closed at $8.51, down from $8.55.

The U.S. dollar lost ground against its major counterparts in European trading. The euro was quoted at $1.1870, up from $1.1863. The dollar bought 117.12 yen, down from 117.14. The British pound traded at $1.7567, up from $1.7531.

EARNINGS NEWS

Actuant Corp. ((ATU)), diversified industrial company, posted Q1 net profit of 70 cents a share, up from 62 cents a share in the year-earlier period, topping analyst expectations of 66 cents a share. Sales climbed 42%, boosted by acquisitions. On a same-business basis, sales were flat after falling 5% the year earlier.

ATI Technologies ((ATYT)), maker of graphics card, reported an 88% decline in profit. Adjusted earnings per share of 10 cents fell from 28 cents a year ago despite revenue growth to beat analyst forecasts for earnings of 4 cents a share.

Palm Inc. ((PALM)), maker of handheld devices, reported its fiscal Q2 net profit soared to $5.02 a share, up from 48 cents a share in the year-earlier period as it booked a tax-related gain and revenue climbed 18%. The results topped analysts'' estimates and the company issued an upbeat outlook for the current quarter. If not for the tax benefit and other items, earnings would have been 47 cents a share, down from 53 cents a share. Analysts expected the company to post a profit before items of 43 cents a share.

Nike Inc. ((NKE)), athletic footwear and apparel company, reported that Q2 profit advanced 15% to $1.14 a share, up from 97 cents in the year-ago period. Earnings beat analysts'' estimate by 11 cents a share. Revenue rose 10% from the comparable period. Strong sales and higher margins at its Nike brand businesses in the U.S. and the Americas drove the better-than-expected earnings.

Jabil Circuit Inc. ((JBL)), electronic systems company, reported a Q1 profit of 37 cents a share, up from 27 cents a share in the year-ago period on revenue growth. The company posted core earnings of 44 cents share, beating the analysts’ estimates for 42 cents a share.

Joy Global Inc. ((JOYG)), a provider of mining equipment and services, posted a Q4 net income of 45 cents a share, up from 16 cents a share in the year-ago period, in line with the analysts’ expectations. Net sales for Q4 advanced 36%. Coal prices in the U.S. remain strong, particularly in the Powder River Basin. The non-U.S. coal business will increasingly be driven by the emerging markets of China, Russia and India.

ATI Technologies ((ATYT)), maker of graphics card, reported an 88% decline in quarterly profit. Adjusted earnings per share came to 10 cents a share, down from 28 cents a share a year ago despite revenue growth, beating analyst forecasts for earnings of 4 cents a share.

FedEx Corp. ((FDX)), package delivery company, reported Q2 earnings of $1.53 a share, up from a profit of $1.15 a share a year-ago on 10% revenue growth, beating analyst estimate of $1.40 a share. The company stated it saw a sharp improvement in its operating margins to 9.8% from 8.2% a year ago due to strong customer demand and a disciplined pricing approach.

CarMax Inc., ((KMX)), car seller, reported Q3 earnings of 25 cents a share, up from a profit of 17 cents a share in the year-ago period on 17% sales growth, topping analyst estimate of 21 cents a share. The latest results include a gain of 3 cents a share related to the company''s Auto Finance operations. The company also said it will no longer provide a forecast of its financial outlook on a quarterly basis. Instead, it will only provide an estimate of same-store used unit sales and earnings per share for the full year.