Wendy's Sales Decline

Elena
03 Feb, 2006
New York City

U.S. stocks traded lower on disappointing employment and consumer data. Downbeat earnings from Amazon and Maytag also weighed on sentiment. The Internet sector was dragged by Amazon''s 11% decline on 43% profit drop in Q4. Maytag posted wider Q4 net loss of 93 cents a share, despite 7% sales growth, missing estimates. Moody reported 22% income rise in Q4 on 21% revenue growth. Wendy''s swung to profit in Q4 but posted sales drop for the first time in 18 years.

U.S. MARKET AVERAGES

Disappointing employment report and earnings news sent stocks in the negative territory.

The Labor Department said that employers added 193,000 jobs in January, up from a 140,000 gain the prior month. The upswing in job creation signaled that the economy was off to a good start this year, but the upbeat data also raised concerns the Federal Reserve would keep raising interest rates. However, the job growth was less than the 250,000 rise forecast by economists, although the unemployment rate slipped to 4.7% from a previous 4.9% level.

Falling consumer confidence widened stocks' losses. The University of Michigan reported consumer sentiment index slid 2.2 points to 91.2 compared with expectations of a slight decrease to 93.1.

Disappointing earnings reports from Amazon.com Inc and appliance maker Maytag Corp also weighed on sentiment. Maytag posted a wider Q4 deficit on restructuring and impairment charges. Internet retailer Amazon.com posted 43% profit drop in Q4, missing estimates.The decline came despite higher sales as the company continues to invest heavily in technology and marketing. Fast-food chain Wendy's International Inc. reversed a year-ago loss of $1.25 a share to post a quarterly profit of25 cents a share, although sales at its flagship restaurants open at least a year fell for the first time in 18 years.

The Internet sector remained the most notable decliner on the session. Airline, computer hardware and gold stocks posted notable losses as well. The biotech sector declined, showing a loss of about 1.1%.

Energy stocks rebounded from early morning losses to trade near the unchanged mark. The oil service sector significantly improved, showing a gain of about 1%. The HMO sector also recovered from an early loss to move into positive territory.

Mylan Laboratories ((MYL)) rallied 13% on earnings and guidance to hit a new 52-week high. Stratex Networks ((STXN)) also moved to a fresh peak owing to strong earnings. BellSouth ((BLS)) resumed an upward momentum, rising to a fresh peak.

Dow component Intel ((INTC)) fell below a recent trading range to a new 52-week low. Fellow blue chip Johnson & Johnson ((JNJ)) also extended its low. Movie Gallery ((MOVI)) dropped sharply to reach a fresh low.

In midday trading, the Dow Jones industrial average fell 36.34, or 0.33%. The Standard & Poor's 500 index was down 4.20, or 0.33%, and the Nasdaq composite index dropped 17.63, or 0.77%.

Bonds recovered from an early decline, with the yield on the 10-year Treasury note falling to 4.55% from 4.56% late Wednesday, but the yield curve remained inverted as the two-year note pressed higher to 4.61%.

MOVERS AND SHAKERS

Clyco Genesys ((GLGS)) voluntarily filed for Chapter 11 bankruptcy protection. The company said it eliminated over half its workforce to give it time to pursue strategic alternatives, including a possible sale of the company. The company’s shares dropped 67.9%.

OccuLogix Inc ((RHEO)), biotechnology company, reported negative results of a phase III MIRA-1 trial of a proposed treatment for the dry form of age-related macular degeneration. The company said the MIRA-1 trial of its RHEO system missed its primary endpoint, failing to demonstrate a statistically significant difference between the treated group and the placebo control group. OccuLogix is in the process of evaluating the implications of the data on its application for marketing approval from the Food and Drug Administration. The stock tumbled 66.7%.

Ryder System Inc ((R)), vehicle fleet management company, reported Q4 net income of $58.8 million, or 92 cents a share, compared with $62.6 million, or 96 cents a share in the year-earlier period on 13% sales growth. Income from continuing operations came to 93 cents a share, missing estimates by a penny. The company forecast 2006 earnings at $3.75 to $3.90 a share. The stock fell 4%.

Rackable Systems ((RACK)), server and data storage company, reported Q4 net earnings of $7.31 million, or 32 cents a share, reversing from a net loss of $14.3 million, or $2.57 a share last year. There were 22.7 million shares outstanding in the fourth-quarter vs. 5.57 million a year ago. Quarterly revenue rose to $83.1 million from $23 million. Company’s shares jumped 19%.

ECONOMIC NEWS

The Department of Commerce release its report on factory orders in the month of December on Friday, showing that order growth came in slightly higher than expected.

The report showed that new orders for manufactured goods rose 1.1 percent in December following an upwardly revised increase of 3.3 percent in November. Economists had expected orders to increase 1.0 percent compared to the 2.5 percent increase originally reported for November.

The increase in factory orders came as new orders for manufactured durable goods rose 1.8 percent in December after rising 5.3 percent in November. The growth in durable goods orders was upwardly revised from the previously reported 1.3 percent growth.

New orders for manufactured non-durable goods also increased in December, rising by 0.3 percent.

The report also showed that shipments rose 2.2 percent in December following a 0.8 percent increase in November. At the same time, inventories rose 0.5 percent after rising 0.3 percent in the previous month.

The U.S. economy added fewer than expected jobs in the month of January, according to a report from the Department of Labor. At the same time, the report showed an upward revision to December job growth and an unexpected decline in the unemployment rate.

The report showed that non-farm payroll employment rose by 193,000 in January following an upwardly revised increase of 140,000 in December. Economists had been expecting payrolls to increase by 275,000 compared to the increase of 108,000 originally reported for December.

The Labor Dept. said that job gains occurred in several industries, including construction, mining, food services and drinking places, health care, and financial activities. Modest declines were seen in employment in retail trade and government.

The report also showed that the unemployment rate unexpectedly fell to 4.7 percent in January from 4.9 percent in December. Economists had expected the unemployment rate to remain unchanged.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks closed largely in the red with tech shares in the spotlight after positive earnings news from electronics giant Matsushita and resumed post-holiday trading in tech-heavy Taiwan. Taiwan’s Weighted index surged 0.96%, shrugging off U.S. markets losses. The most notable decliner was South Korea’s Kospi ending deeply down 3%. The Japanese Nikkei lost 0.3% hurt by weak major consumer electronics shares, following recent gains.

European stocks rebounded from early gains to close in the negative on U.S. payrolls data which raised concerns of further interest rate increases and disappointing earnings from Volvo Group. The German DAX 30 slipped 0.3%, the French CAC 40 fell 0.3%, and London’s FTSE 100 lost 0.1%.

OIL, METALS, CURRENCIES

Crude oil advanced as market kept watch over IAEA which was to decide whether to refer Iran to the UN Security Council over its nuclear program. Light sweet crude for March delivery gained 27 cents to $64.95 a barrel. Heating oil edged up a cent to $1.7825 a gallon, while gasoline inched up to $1.6730. Natural gas lost nearly 2 cents to $8.330 per 1,000 cubic feet. London Brent rose 14 cents to $63.02.

European gold traded lower. In London gold traded at the fixed price of $569 bid per troy ounce, down from $572.15. In Zurich the precious metal traded at $568.50, down from $572.80. In Hong Kong gold rose 95 cents to close at $572.90. Silver closed at $9.74, down from $9.83.

The U.S. dollar gained ground against other major currencies. The euro was quoted at $1.2022, down from $1.2098. The dollar bought 118.86 yen, up from $118.50. The British pound stood at $1.7627, down from $1.7804.

EARNINGS NEWS

Ryder System Inc, ((R)), vehicle fleet management company, reported Q4 net income of 92 cents a share, down from 96 cents a share in the year-ago period. Income from continuing operations amounted to 93 cents a share, a penny down from the analyst estimate. Sales for the company grew 13%.

Weyerhaeuser Co, ((WY)), wood, paper and packaging company, reported a Q4 loss of 86 cents a share, swinging from a net income 82 cents a share a year-ago. After adjusting for items, the company earned 98 cents a share, topping analyst estimate of 74 cents a share.

THQ Inc, ((THQI)), video game publisher, reported a Q3 profit of 72 cents a share, down from $1.05 a share a year-ago on revenue decline, topping analyst estimate of 65 cents a share.

Moody''s Corp, ((MCO)), credit ratings, research and risk analysis provider, reported Q4 net income of 50 cents a share, up about 22% from 40 cents a share in the year-earlier period on 21% revenue growth, beating analyst estimate for earnings of 46 cents a share.

Carbo Ceramics Inc, ((CRR)), provider of equipment and services for natural-gas and oil wells, reported Q4 net income of 43 cents a share, down from 45 cents in the same period the previous year. Revenue grew to $63.6 million from $62.2 million while Q4 operating profit dropped to $15.8 million from $16.6 million. Analyst forecast earnings of 48 cents a share.

Maytag Corp, ((MYG)), home and commercial appliances manufacturer, reported a Q4 net loss of 93 cents a share, down from a net loss of 18 cents a share in the year-earlier period despite 6.6% sales growth, missing analysts’ expectations of a loss of 13 cents a share. Q4 results were affected by restructuring charges in connection with the closing of the Florence, S.C., plant, a non-cash asset impairment charge related to a laundry product line and a goodwill impairment charge involving a commercial cooking business were recorded in Q4

B/E Aerospace Inc., ((BEAV)), aircraft cabin products maker, reversed to a Q4 profit of 96 cents a share, benefiting from a $52 million tax benefit. If not for the tax benefit and one-item items, it would have earned 18 cents a share, while sales rose 18% to $223 million.

Volvo Group, ((VOLVY)), truck maker, reported that Q4 net income dropped 15% to 7.37 kronor a share, while sales grew 15%. The company announced that operating margin in Q4 fell to 6.5% from 8.2% last year on account of extensive product launches. Volvo stated its income was affected by a 430 million kronor capital gain from the sale of Celero and a 550 million kronor write down of its holdings in Blue Bird.