Dell, Nvidia Profits Rise

Elena
17 Feb, 2006
New York City

Soaring oil prices, better-than-expected rise in wholesale prices and disappointing earnings outlook from Dell sent stocks lower. However, the computer maker reported 52% profit jump in Q4 on 13% revenue growth, beating estimates. Chipmaker Nvidia said Q4 net income almost doubled to 53 cents on 12% sales growth, exceeding expectations of 49 cents a share.

U.S. MARKET AVERAGES

Stocks started trading in the negative, hurt by surging oil prices and disappointing outlook from computer maker Dell. Market sentiment was also affected by economic reports which revealed a larger-than-anticipated rise in wholesale prices and weakening consumer confidence.

Oil futures sharply rose Friday on supply concerns, following a threat from Nigeria to declare ‘total war’ to all foreign oil countries. A barrel of light crude jumped $1.18 to $59.64 on the Nymex.

Dell reported 52% profit jump in Q4 on 13% revenue growth, beating expectations. The company also forecast Q1 results below analysts' expectations which added to the market's worries about shrinking profits in 2006.

In economic news, investors were disappointed with a 0.3% rise in January's PPI, which grew faster than economists' prediction for a 0.2% increase. The Labor Department also said that Core PPI, which excludes volatile energy and food prices, rose 0.4%.

Technology stocks were the most notable decliners in the opening hours. The disk drive sector was among the worst performers with a decline of 1.9%, dragged largely by Advanced Digital Information Corp. ((ADIC)) which fell more than 11% on earnings news.

Commodity stocks were the early standouts to the upside. The gold sector climbed nearly 2.8%. Energy stocks were also strong, extending yesterday's gains with the oil service sector up about 1.5%.

In midmorning trading, the Dow Jones industrial average fell 30.97, or 0.28%. The Standard & Poor's 500 index was down 4.24, or 0.33%, and the Nasdaq composite index slid 14.00, or 0.61%.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.54% from 4.59% late Thursday.

ECONOMIC NEWS

The Department of Labor released its report on producer prices in the month of January on Friday, showing that prices rose in line with economist estimates. At the same time, the report showed a bigger than expected increase in core prices.

The Labor Dept. said that its producer price index rose 0.3 percent in January following a 0.6 percent increase in December. Economists had been expecting the index to increase by about 0.3 percent.

The relatively modest increase in prices came as energy prices were unchanged in January after surging up by 2.0 percent in December. Food prices edged up by 0.2 percent in January following a 0.8 percent increase in the previous month.

The report also showed that core prices, which exclude food and energy prices, rose 0.4 percent in January after edging up by 0.1 percent in each of the two previous months. The increase marked the biggest rise in core prices in a year and exceeded economist estimates of 0.2 percent growth.

The bigger than expected increase in core prices may raise some concerns about inflation and the possibility of further interest rate hikes by the Federal Reserve. Subsequently, traders are likely to keep a close eye on next week''s report on January consumer prices.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks ended Friday session mixed. The Nikkei sharply dropped 330 points, or 2.06%, despite higher-than-expected GDP growth. Across the region South Korea’s Kospi climbed 1.4%, Hong Kong’s Hang Seng gained 0.2%, while the Bombay Stock Exchange’s Sensitive index suffered a steep decline of 1.13%.

European stocks reached a new four-and-a-half year high in a quiet morning session Friday. Economic news from the U.S. and Japan failed to give a certain direction to the stocks and the U.K.’s Daily Mail & General Trust tumbled 11%. The German DAX 30 lost 0.1%, the French CAC 40 added 0.1%, and London’s FTSE 100 was slightly down st 5.827.

OIL, METALS, CURRENCIES

Crude oil prices advanced on renewed supply concerns, raised by Nigeria’s threat to declare ‘total war’ to all foreign oil companies. Light sweet crude for March delivery rose $1.29 to $59.75 a barrel. London Brent climbed $1.30 to $60.09.

European gold prices recovered from recent declines. In London gold traded at the fixed price of $545.75 bid per troy ounce, up from $540.80. In Zurich the precious metal traded at $546.20, up from $539.30. In Hong Kong gold rose $4.70 to close at $544.70. Silver opened at 9.36, up from $9.25.

The U.S. dollar advanced against most other major currencies. The euro traded at $1.1874, down from $1.1893. The dollar bought 118.32 yen, up from 117.74. The British pound stood at $1.7372, down from $1.7395.

EARNINGS NEWS

Talk America Holdings Inc, ((TALK)), communications services provider, reported Q4 earnings of 7 cents a share, down from a profit of 40 cents a share a year-ago on revenue decline.The company expects EBITDA of $13 million to $15 million, aside from stock option expense.

Sierra Pacific Resources Inc, ((SRP)), electric energy company, reported Q4 earnings of 11 cents a share, down from an equivalent profit of 15 cents a share a year-ago, topping views of 7 cents a share.

Telus Corp, ((TU)), telecom company, reported Q4 net income Friday of 22 cents a share, down from 38 cents a share in the year-ago period. Charges of about 24 cents a share hurt Telus Q4 net earnings. Revenue advanced by 6.2% to C$2.09 billion from C$1.96 billion.

Dell, ((DELL)), computer producer, reported Q4 net income of 43 cents a share, up from 26 cents a share in the year-ago period on 13% revenue growth, even though desktop PC sales were unsatisfactory, topping analyst views of 41 cents a share. The increase was a reflection of strong demand for Dell''s laptops, software and peripheral computer products.

Zale Corp, ((ZLC)), jewelry retailer, reported Q2 earnings of $1.78 a share, down from a profit of $1.91 a share a year-ago. If not for items, such as restructuring costs related to its closing of certain Bailey Banks & Biddle locations and a tax benefit from the repatriation of foreign earnings, the company reported a profit of $1.96 a share. Revenue advanced 2.3%. The analysts’ estimates were for a profit of $1.91 a share in Q2.

Sirius Satellite Radio, ((SIRI)), media firm, reported a Q4 loss of 23 cents a share, slightly down from a loss of 21 cents a share in the year-ago quarter despite revenue growth, missing by a penny analyst estimate of a loss of 22 cents. Subscriptions advanced 190% and the company expects six million subscribers by the end of 2006.

RadioShack Corp, ((RSH)), home electronics retailer, posted a decline in Q4 net income of 36 cents a share, down from 81 cents a share in the year-earlier period due to weakness in wireless sales and lower sales in its high-margin categories. Excluding an accounting change Q4 of 2005 earnings per share was 38 cents, missing analysts’ forecasts of 67 cents a share. As part of a restructuring plan, RadioShack will replace old, slower-moving merchandise with new, faster- moving merchandise within higher growth categories. Closure of 400 to 700 company-operated stores and expand its kiosk business is envisaged.

American Pharmaceutical Partners, ((APPX)), producer of injectable pharmaceutical products, reported Q4 net income of 32 cents a share, up 7% from 30 cents a share in the year-earlier quarter on 18% revenue growth, missing analysts’ expectations of 35 cents a share.

J.M. Smucker Co, ((SJM)), jelly maker, reported that Q3 net income shed 13.3% to 54 cents a share due to 2.5% sales decline. Adjusted earnings from continuing operations before restructuring costs came to 68 cents a share, down vs. 70 cents, missing analyst estimate of 73 cents.

Hewlett-Packard Co., ((HPQ)), computer and printer maker, reported a 30% jump in profit to 42 cents a share, up from 32 cents a share a year-ago and a nearly 6% increase in revenue for its Q1 on cost cutting and enhanced profit and sales across its portfolio of businesses. If not for amortization and other items, the company would have reported net income of 48 cents a share, topping expectations of 44 cents.