GM Posts Heavy Losses

Elena
26 Jan, 2006
New York City

Stocks opened higher on upbeat economic data and strong earnings from major companies, including Caterpillar, despite General Motor''s heavy losses in the fourth quarter and full-year. The automaker posted Q4 profit loss of $8.45 a share vs. a loss of 18 cents a year ago and a loss of $15.13 per share for 2005 vs. net income of $4.92 in 2004. Eli Lilly swung to profit in Q4. Caterpillar posted 54% profit jump in Q4, above estimates. Honeywell posted a Q4 earnings rise in line with estimates.

U.S. MARKET AVERAGES

Stocks jumped sharply higher at opening on a positive reaction to the morning slew of earnings reports and upbeat economic news with the 3 main equity indices each up about 0.6%.

The strongest support was provided by Dow Jones industrials Caterpillar Inc which posted 54% profit jump in the fourth quarter on sales growth, exceeding analyst estimates. The positive results from the machinery maker brought some relief to the market which suffered the deeply disappointing quarterly news from General Motors. The automaker posted fourth-quarter and full-year loss, far below expectations.

Wall Street's concerns about the state of the economy eased after the Commerce Department reported an all-time high in factory orders for big-ticket items. Orders for durable goods rose 1.3% in December following an upwardly revised increase of 5.4% in November, below economists’ expectations of an increase by 1.5%.

A separate report from the Labor Dept. showed that initial jobless claims in the week ended January 21 rose to 283,000 from the previous week''s revised figure of 272,000. Economists had expected a more significant increase to about 305,000.

On one of the busiest days of the earnings season a number of major companies released quarterly results. Dow components AT&T reported better-than-expected profit, Lockheed and Danaher Corp also beat estimates with strong quarterly results. Honeywell posted Q4 profit rise in line with estimates, while Verizon reported net income decline in Q4 but above expectations. Drug maker Eli Lilly swung to profit in Q4, missing estimates. First Data posted 14% net income drop.

Insurance stocks advanced in the opening hours, led by UnumProvident ((UNM)) with an advance of 5% on an upgrade from Bear Stearns. The transportation group, helped by gains in the trucking sector, also moved to the upside. The Dow Jones Transportation Average rose more than 1.1%.

Energy stocks were weak in the early going, especially the oil service sector, falling by about 1.1%. The gold sector also moved to the downside, giving back some of Wednesday's advance. Networking stocks showed weakness as well.

In the first hour of trading, the Dow rose 64.35, or 0.6%.The Standard & Poor's 500 index added 7.73, or 0.61%, and the Nasdaq composite index gained 14.74, or 0.65%.

Bonds continued to fall for a second session, with the yield on the 10-year Treasury note rising to 4.50% from 4.48% late Wednesday.

MOVERS AND SHAKERS

Estee Lauder Cos ((EL)) posted Q4 earnings drop of 40.9% to $81.7 million or 38 cents a share, citing charges. Net earnings from continuing operations grew 7.7% to $150.4 million or 70 cents a share. Revenue climbed 2.7% at $1.78 billion. Analysts expected earnings of 56 cents a share on revenue of $1.8 billion. The company projected revenue in 2006 to grow around 3% and earnings to be in the range of $1.61 to $1.68 a share. The stock gained 2.7%.

Hartmarx Corp. ((HMX)) reported Q4 net earnings of $7.3 million or 20 cents a share, up from the prior year's profit of $5.8 million, or 16 cents, exceeding estimates of 16 cents a share. Revenue rose to $156.8 million from $152.2 million. Operating earnings increased to $13.9 million from $11 million. Hartmarx projected 2006 earnings-per-share growth in a range of 12% to 20%. The company’s shares rose 7%.

Juniper Networks ((JNPR)) posted 60% profit growth in Q4. The company earned $105.5 million, or 17 cents a share, compared to $66 million, or 11 cents a share, during the year-ago period. Excluding charges and one-time items, Juniper earned $119.6 million, or 20 cents a share, meeting estimates. Revenue rose 34% to $575.5 million, but below the $579 million expected by analysts. The company released a weaker-than-expected first-quarter forecast. The stock dropped 20%.

ECONOMIC NEWS

The Department of Labor released its report on initial jobless claims in the week ended January 21 on Thursday, showing that jobless claims rose much less than economists had been expecting.

The report showed that jobless claims rose to 283,000 from the previous week's revised figure of 272,000. Economists had expected a more significant increase to about 305,000 from the 271,000 originally reported for the previous week.

The Labor Dept. also said that the less volatile 4-week moving average fell to 288,750 from the previous week's revised average of 299,500. This marks the fourth consecutive decline for the 4-week moving average, which has fallen to its lowest level since July of 2000.

The report also showed that continuing claims rose to 2.581 million in the week ended January 14 from the preceding week's revised level of 2.528 million.

Thursday morning, the Department of Commerce released its report on new orders for durable goods in the month of December. The report showed that orders for durable goods rose 1.3 percent in December following an upwardly revised increase of 5.4 percent in November. Economists had been expecting orders to increase by 1.5 percent compared to the 4.4 percent increase originally reported for November.

The increase in December was partly due to a significant increase in orders for machinery, which rose 6.5 percent in December after rising by 3.1 percent in November. Orders for transportation equipment also saw some further upside after moving sharply higher in the two previous months.

The report also showed that shipments of durable goods rose 3.5 percent in December, reaching the highest level since the series began. At the same time, inventories of durable goods increased only modestly after rising 0.6 percent in November.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks advanced Thursday, lifted by strengthening U.S. dollar and continuously falling crude oil prices. The Nikkei climbed 1.2% to 15,835.98, Taiwan’s Weighted index surged 1.24%, while South Korea’s Kospi rebounded from early losses to finish up 0.24%. Shanghai stock markets were closed for the Chinese Lunar New Year holiday and will reopen on February 6.

European stocks traded higher at mid-day, despite a weaker close of U.S. markets overnight. European averages were boosted by gains at the industrial conglomerate Siemens AG and telecom giant Deutsche Telecom. The German DAX 30 rose 0.9%, the French CAC 40 climbed 0.7%, and London’s FTSE 100 advanced 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices advanced, following a three-day sell-off, as continuous worries about international supplies counteracted the fuel inventories increase. Light sweet crude for March delivery gained 21 cents to $66.06 a barrel. London Brent rose 37 cents to $64.61.

European gold prices climbed. In London gold traded at the fixed price of $562.25, up from $562. In Zurich the precious metal traded at $560.90, up from $560.70. In Hong Kong gold surged $10.90 to close at $562.10. Silver opened at $9.46, up from $9.41.

The U.S. dollar was strong against most other major currencies. The euro was quoted at $1.2241, down from $1.2248. The dollar bought 115.88 yen, up from 115.64. The British pound stood at $1.7851, up from $1.7838.

EARNINGS NEWS

Caterpillar Inc., ((CAT)), machinery maker, reported Q4 net income of $1.20 a share, compared with 77 cents a share in the year-ago period, beating analyst estimate of $1.10 a share. Sales at the company in Q4 advanced by more than 12% to $9.66 billion from $8.58 billion.

Lockheed Martin, ((LMT)), defense contractor, reported Q4 earnings of $1.29 per share, up from 83 cents per share last year beating analyst estimate for earnings of $1.15 per share. Net sales for the period came in at $10.22 billion, up from last year''s sales of nearly $9.97 billion.

Honeywell International, ((HON)), industrial company, reported Q4 earnings of 62 cents a share, up from 30 cents a share a year-ago, matching analyst estimate. On a continuing operations basis, the company posted earnings of 61 cents a share in Q4. Sales advanced in Q4 to $7.28 billion from $6.64 billion in the same period a year ago.

AT&T Inc., ((T)), communication company, reported that Q4 profit reached 46 cents a share, from up more than double from 21 cents in the year-ago period, with revenue up 26%. Adjusting for merger-related, severance, and Cingular hurricane costs, and a gain from tax settlements, the company would have earned 48 cents a share, beating analysts’ forecasts of earnings of 45 cents.

Baxter International, ((BAX)), medical products company, reported Q4 net earnings of 46 cents a share, from continuing operations on a GAAP basis up from 17 cents a share a year ago. If not for special charges, the company earned 60 cents a share in Q4, topping analyst estimate of 58 cents a share. Sales dropped 4% to $2.5 billion.

ChoicePoint, ((CPS)), I.D. services company, reported Q4 net earning of 30 cents a share, down from 43 cents a share a year ago despite 11% revenue growth, missing analyst estimate of 45 cents a share. If not for a 14 cents charge related to an FTC probe of fraudulent data access, the company would have earned 44 cents a share.

Eli Lilly and Company, ((LLY)), drugmaker, reported that Q4 net income was 64 cents a share, up from a net loss and no earnings per share, missing analyst estimate of 78 cents a share. The latest result includes 14 cents a share of charges from restructuring and asset impairments. Sales in Q4 advanced 6% to $3.88 billion.

First Data Corp, ((FDC)), payment systems company, reported a 14% drop in Q4 net income to 52 cents a share and added it plans to separate its Western Union consumer payments business into an independent publicly traded company. Revenue for Q4 increased 3% to $2.77 billion. The company announced that the Western Union business will be spun-off to First Data shareholders. The separation is due to be completed in the second half of 2006.

Danaher Corp, ((DHR)), industrial and consumer products manufacturer, reported Q4 net earnings of 81 cents a share, up from 67 cents in the same period of 2004, beating analyst estimate by a penny. Sales rose 14.5%, topping $2.26 billion compared to $1.98 billion in the prior year. Revenue growth from existing businesses increased 5.5%. Operating profit reached $367.6 million from $316 in the year-earlier Q4, as operating margin widened to 16.2% from 16.0%.

Potash Corp., ((POT)), mining and production and sale of potash company, reported Q4 net income of $1.09 a share, up from the previous year''s 88 cents, topping analysts’ forecasts of 98 cents a share. Potash Corp. accelerated stock buybacks during Q4, repurchasing 3.6 million shares for $290.6 million. The company also expects earnings growth of 10% to 30% for 2006, with profit projected at $1 to $1.25 a share for the Q1 and at $5.25 to $6.25 a share for the full year. Analysts’ estimates are for $1.41 and $5.71 a share, respectively.