Energy Stocks Gain

Elena
06 Feb, 2006
New York City

Rising crude oil prices, light earnings schedule and investment rating upgrades of Yahoo, Nike and Alcoa led stocks to a lackluster performance. In earnings news, Humana Inc. posted 37% profit rise in Q4 on 14% revenue growth. Louisiana-Pacific reported Q4 net income rose sixfold to 80 cents a share, exceeding estimates of 65 cents a share. Toshiba Corp. announced that it was buying nuclear plant builder Westinghouse Electric for $5.4 billion. The company will retain 51% of the stock.

U.S. MARKET AVERAGES

In a lighter day of earnings reports and no major economic release, oil prices played the leading part. A fresh rise of crude oil prices, caused by renewed tensions over Iran's nuclear program, offset brokerage upgrades of Alcoa, Yahoo, Nike keeping stocks at the unchanged mark.

In the subsiding storm of earnings releases, some quarterly reports will still draw attention during the week’s trading with Dow component Disney the most prominent of all companies scheduled to release news. The entertainment giant, which recently announced a $7.4 billion deal to acquire animated movie studio Pixar, is expected to earn 30 cents per share, down from 34 cents per share in the same period last year.

On the analyst front, JPMorgan upgraded Dow component Alcoa to overweight on indications that the market is ignoring strong aluminum prices.

Stifel Nicolaus analysts also raised Internet firm Yahoo one notch to buy saying a recent decline makes the stock an attractive investment.

Another broker, UBS, upgraded its rating on the shoe company Nike Inc ((NKE)). Merrill Lynch upgraded Bank of America Corp. to buy from neutral, citing valuation and positive outlook.

The semiconductor sector rose during the morning session with an advance of about 1.7%, recovering from losses recorded through most of last week. Internet and computer hardware stocks showed some mild gains as well.

Micron ((MU)) built on January gains, rising 5% and moving to a new 52-week high. Transocean ((RIG)) moved to a fresh high, helped by news of a significant contract in India.

Cendant ((CD)) added to a recent loss, extending its 52-week low. Vodafone ((VOD)) and Deutsche Telekom ((DT)) set fresh lows as well.

In midday trading, the Dow rose 3.12, or 0.03%.The Standard & Poor's 500 index was up 1.09, or 0.09%, and the Nasdaq composite index fell 3.56, or 0.16%.

Bonds slipped, with the yield on the 10-year Treasury note rising to 4.54% from 4.53% late Friday, although the yield curve remained inverted as the two-year note edged up to 4.62%.

MOVERS AND SHAKERS

Alcoa ((AA)) was upgraded at J.P. Morgan to overweight from neutral. The broker cited strong aluminum prices and the impact it will have on the company''s earnings and cash flow in 2006. The stock rose 4.1%.

Micron Technology ((MU)) was upgraded to buy at Citigroup. The firm also lifted its price target on the stock to $21 from $15. The stock gained 4.6%.

Blue Coat Systems ((BCS)), Internet security company, cut its Q3 earnings outlook, placing it below analyst estimates. The company said it expects to earn $2.1 to $2.7 million in the quarter, or 14 to 18 cents on a per-share basis on revenue of $34.5 to $35.1 million. The average estimate of analysts is for earnings of 35 cents a share and revenue of $38.9 million. The company’s shares slid 34%.

Talbots Inc ((TLB)) agreed to acquire J.Jill Group Inc ((JILL)) for $24.05 per share in cash, or about $517 million. Talbots will finance the deal with a new $400 million credit facility and cash on hand. The transaction is expected to add to Talbots earnings in fiscal 2007. J. Jill will continue to operate under its name. The company’s stock fell 3.6%.

NetBank ((NTBK)) reported Q4 net income of $895,000, or 2 cents a share, reversing a loss of $17.7 million, or 38 cents a share a year ago, meeting analyst expectations. NetBank also said it expects lower Q1first-quarter results with estimates ranging from a loss of 1 cent to earnings of 8 cents a share. The bank’s shares dropped 4.5%.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks reversed from morning weakness to rally in the afternoon, posting solid gains despite higher oil prices, pushed up by escalating tension in the Middle East. The leading gainer was Shanghai Composite, surging to 2.35% after an extended holiday. The Nikkei hit a fresh 5 ½-year high rising 0.53% to 16,747.76 on strong economic data. Among other regional markets, Taiwan’s Weighted index climbed 1.9%, Hong Kong’s Hang Seng rose 0.6%, and South Korea’s Kospi gained 0.6%.

European stocks closed in the green as bid speculations in the bank sector offset some mixed corporate news. The gainers were led by the Italian MIB 30 which surged 1.2%. The German DAX 30 gained 0.2% and London’s FTSE 100 advanced 0.3%.

OIL, METALS, CURRENCIES

Crude oil prices advanced amid renewed political tension over Iran’s nuclear program. Light sweet crude for March delivery gained 58 cents to $65.95 a barrel. Heating oil added 1 cent to $1.7950 a gallon, while gasoline only marginally rose to $1.6820. Natural gas dropped 42 cents to $8.190 per 1,000 cubic feet. London Brent rose 41 cents to $63.80.

European gold prices advanced. In London gold traded at the fixed price of $572.80 bid per troy ounce, up from $569. In Zurich the precious metal traded at $573.10, up from $568.50. In Hong Kong gold fell $2.90 to close at $570. Silver closed at $9.83, up from $9.74.

The U.S. dollar strengthened against most other major currencies. The euro was quoted at $1.9979, down from $1.2022. The dollar bought 118.81 yen, down from $118.93. The British pound stood at $1.7509, down from $1.7613.

EARNINGS NEWS

Temple Inland Inc, ((TIN)), wood products and financial services company, reported Q4 net income of 21 cents a share, down from 46 cents a share in the year-ago period, missing analyst views for earnings of 27 cents a share. The company announced that the figure excluded 9 cents share in special items and included 2 cents a share in discontinued items.

Louisiana-Pacific Corp, ((LPX)), maker of building materials, reported Q4 net income of 80 cents a share, more than six times better than the year-ago profit of12 cents a share, beating analyst estimate of 65 cents a share. The company announced its income from operations was 86 cents a share in the Q4 of 2005.

NeuStar Inc, ((NSR)), provider of clearinghouse services reported that Q4 net income more than tripled to 18 cents a share, up from 5 cents a share in the year-earlier period on 53.1% revenue growth, driven mainly by an increase in transactions under contracts to ensure telephone number portability services.

Ipsco Inc, ((IPS)), steelmaker, reported Q4 net income of $3.52 a share, down from $3.91 a share in the year-ago period, beating analyst estimate of $2.84 a share. Currency translations subtracted 15 cents a share from earnings in Q4, and costs of early debt retirement also had its bearing on earnings by another 9 cents a share. Additionally, a lower effective tax rate contributed 62 cents to earnings. Gross margin narrowed to 30.3% from 35.5%, due to higher costs for alloys, energy and consumables.

Humana Inc., ((HUM)), health benefits company, reported a 37% increase in Q4 net profit to 39 cents a share on 14% revenue growth due to a significant increase in Medicare business. If not for 7 cents a share, in Hurricane Katrina-related expenses, the company announced it would have earned 46 cents a share, beating analysts’ forecasts by a penny.

Serono, ((SRA)), biotech company, announced Q4 adjusted net income soared 72.2% to 25 cents per U.S.-listed share, despite 1.4% revenue decline. The company’s profit climbed on a fall in selling, general and administrative expenses as well as a decrease in research and developments costs. Serono plans to raise its annual dividend by 11.1%.