General Motors Declines 5%

123jump.com Staff
08 Feb, 2006
New York City

Morning momentum in the market weakens after more than one hour of trading. Traders reacted positively to the earnings news from Cisco, PepsiCo and January same-store sales from McDonald''s. Blue Nile dropped 20% on earnings news. Cheesecake Factory, Dean Foods and Given Imaging are other decliners on earnings news.

MARKET UPDATE

After rough patch of few trading days market seems to be in the rebound mood. A fresh batch of earnings suggests that market may be able to sustain a weak rally at least for today. Early rally at the opening is weakening after more than an hour of trading.

Woes at General Motors are expected to dominate the early hours of trading. Yesterday’s cut in dividend and management salaries and retirement benefits are certainly steps in the right direction but are not likely to help the company at least in the near future. Market fears that more significant cuts from labor and management may be necessary and that too very soon. Apart from cost cutting, General Motors still does not have turnaround plan to protect and grow its market share in North America.

General Motors ((GM)) shares decline 4.5% in the early trading.

General Motors stock was cut to “sell” rating by Deutsche Bank analyst citing that current job cuts and salary cuts announced by the company do not go very far. Analyst Rod Lache lowered his price target on the stock from current price of $22 to $17. In his notes he cited that his concerns 'go beyond market erosion, uncertainty of GMAC sale and Delphi settlement.'

MOVERS AND SHAKERS

Lazard Ltd ((LAZ)) reported Q4 pro forma net income of $57.3 million, or 57 cents a share, up 56% from $36.6 million, or 37 cents a share, in the year-ago period, beating estimates of 49 cents a share. Operating income rose 7% to $77.1 million. Total revenue fell to $392 million from $401 million. Operating revenue fell 2% to $388 million. The stock rose 8.2%.

Mesa Air Group Inc ((MESA)) reported January traffic increase of 10.6% to 500 million revenue passenger miles from 452 million miles in the same period a year earlier. Load factor was 68.3% for the month. The stock gained 3.7%.

Nuance Communications ((NUAN)) agreed to buy Dictaphone Corp. for $357 million in cash. Nuance expects the acquisition to add between $80 million and $85 million in revenue in fiscal 2006 and between $180 million and $200 million in revenue in 2007. The acquisition is also expected to dilute GAAP earnings by around 11 to 12 cents a share 2006 and by 2 to 5 cents in 2007. The company’s shares gained 1.6%.

The New York Times ((NYT)) posted January advertising revenue rise of 3.4% to $198 million and total company revenue rise of 3.2% to $300 million. However, excluding the acquired in March 2005 About.com, advertising revenues decreased 0.3% and total company revenues increased 0.7%. The company also said it'll start printing its National edition in Houston as part of an expansion of home delivery and retail distribution to readers in the metropolitan Houston area and southeastern Texas. The stock gained nearly 1%.

Cheesecake Factory ((CAKE)), restaurant chain, reported Q4 net earnings rise of $23.4 million, or 29 cents a share, compared with $19.9 million, or 25 cents a share a year ago. The company posted revenue of $328.3 million vs. $266.1 million, missing analyst estimates of a revenue of $330 million. The stock fell 4.2%.

Dean Foods ((DF)), food and beverage company, reported Q4 earnings from continuing operations of $70.7 million, or 49 cents a share, down from a profit of $85.2 million, or 55 cents a share a year ago. On an adjusted basis, excluding certain charges, the company earned 54 cents a share. Sales rose 4% in the latest three months to $2.69 billion from $2.6 billion in the same period a year ago. The average analyst estimate was for a profit of 54 cents a share on revenue of $2.64 billion. Dean Foods projected Q1 adjusted earnings of 39 to 41 cents a share and reaffirmed its outlook for earnings of $2.20 to $2.25 a share for the full year on sales of about $10.5 billion. The company’s shares lost 2.1%.

ECONOMIC NEWS

Crude oil inventories ticked down in the latest week, according to government statistics released Wednesday, giving back a fraction of the previous week's gain. Meanwhile, stocks of gasoline recorded another sharp rise.

The Department of Energy's Energy Information Administration revealed that crude oil inventories fell by 300,000 barrels for the week ended February 3, dropping to 320.7 million barrels from the prior week's level of 321.0 million barrels. This followed a gain of 1.9 million barrels in the previous week. Oil inventories were 10.7% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week increase of 4.3 million barrels, the government said, adding to a recent string of gains that included the previous week's build of 4.2 million barrels. Gasoline stocks were 1.7% above their levels of last year. Inventories of distillate fuel oil ticked down by 300,000 barrels in the most recent week.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished deeply in the red with investors cautious amid disappointing Japanese earnings and weakness on Wall Street. The Nikkei tumbled 2.68% with Morgan Stanley cut its outlook on Japan after recent equities gains. South Korea’s Kospi dropped 1.6%, Taiwan’s Weighted index slipped 1.4%, and Hong Kong’s Hang Seng fell 0.9%. The sole gainer among regional markets was Shanghai Composite, up 025%.

European stocks traded in the negative at mid-day on weak resource stocks, hurt by lower commodity prices. The German DAX 30 lost 0.6%, the French CAC 40 dropped 0.9%, and London’s FTSE 100 fell 0.5%.

EARNINGS NEWS

On the earnings from Cisco ((CSCO)) reported earnings of 22 cents vs. 21 cents a year ago. Net revenue declined on rise in sales of 9.3%. Cisco is the most active stock on Nasdaq up 5% at the opening.

PepsiCo ((PEP)) reported fourth quarter profit of 65 cents vs. 58 cents a year ago on revenue growth of 15% to $10.1 billion. For the full year 20005 the company profit fell to $2.39 from $2.44 per share on revenue growth of $32.56 billion from $29.3 billion.

Blue Nile ((NILE)), online jewelry retailer shares plunged 20% at the opening on earnings report. The company reported earnings of 29 cents vs. 24 cents a year ago on revenue growth of 13.5% to $73.2 million in the fourth quarter.

The company missed analysts’ projection of 33 cents per share earnings. For the year 2005 earnings grew to $13.2 million or 71 cents per share from $10 million or 56 cents a share a year ago. For the first quarter the company projected sales of $47 million and profit of 10 to 11 cents a share well below analysts projection of 16 cents.

IAC/Interactive Corp ((IACI)) reported fourth quarter earnings of 33 cents vs. loss of 13 cents a year ago on revenue on revenue growth of 45% to $1.79 billion. Excluding non-recurring items earnings would have been 56 cents vs. 41 cents a year ago.

McDonald’s ((MCD)) said that January same-store sales rose 9.7% in the U.S. and 5.7% world-wide.

OIL, PRECIOUS METALS

Oil traded lower in the early morning as market awaited weekly petroleum report from Department of Energy. According to the report Crude oil and distillate inventories inched lower by 0.3 millions of barrels and that of crude oil jumped up by 4.3 millions of barrel. After the report and as in the morning crude oil traded lower near $62.70 per barrel and gasoline and heating oil inched fractionally lower.

CORPORATE NEWS

Nortel Networks Corp. ((NT)) stated that it has reached preliminary settlement with two shareholders class-action lawsuits. The total settlement worth $2.74 billion has terms involving stock, cash and future contributions. The company will pay app. $570 million cash and issue 14.5% of new equity and contribute 50% of any proceeds received from future collections from lawsuits against former executives.

Pfizer ((PFE)) plans to spin-off its consumer products division representing 8% of its total sales or revenue of $3.88 billion. The stock is trading 3% higher at the opening.