Federal Reserve raises interest rates
By Rick Paler
There was not much news this week to hold up the market. Traders anxiously awaited the Federal Reserves announcement on interest rates to provide direction. Earnings news again was light and the economic news for the week was the PPI and CPI numbers.
As expected on Tuesday, the Federal Reserve raised interest rates another 25 basis points to 2.75%. Wall Street had already priced the move into the market, but anxious traders waited to see if the policy statement would be changed. Since the Federal Reserve began raising interest rates the policy statement has included wording indicating that they would raise rates at a “measured” pace to hedge against inflation. Some traders anticipated that with the expanding economy and higher energy prices the Federal Reserve would remove the wording “measured.” The policy statement this time retained the wording “measured,” but also included wording about increasing inflationary pressures. Added to the policy statement was the following wording “pressures on inflation have picked up in recent months and pricing power is more evident.” The addition of this wording caused many to fear increased inflation in coming months and the market sold off in response.
Another merger deal was announced this week, this time in the internet sector. IAC Interactive (IACI) announced that they were buying Ask Jeeves (ASKJ) for $28.24 per share, a 15% premium over the prior days close. The company that already owns Expedia.com, Ticketmaster and Match.com will have additional presence on the web with the acquisition of the fifth largest internet search engine. The total value of the deal is estimated at $1.85 billion.
The only major earnings release this week was Oracle (ORCL). The company disappointed the market when they released their fiscal third quarter results. Revenues at the company increased 18% to $2.95 billion, but their net income declined 15% to $540 million. Earnings came in at $0.16 per share a penny ahead of estimates. Oracle also raised their full year guidance to $0.62 to $0.64 per share.
Home builders continue to rack up the profits. This week, KB Home (KHB) posted a 65% gain in their first quarter earnings when they announced that they had earned $2.82 per share or $122.7 million. This was well ahead of Wall Streets estimates of $2.58 per share. Revenues at the company also rose 21% from a year ago to $1.6 billion. The builder of moderately priced homes also raised their guidance for 2005 to $15.75 up $1.25 from their prior guidance.
Home builder Lennar (LEN) announced their first quarter net income also easily beat analysis estimates of $1.01 when they posted results of $1.17 pre share. Sales also increased 29% to $2.4 billion. Full year 2005 guidance was also raised at the company.
Williams-Sonoma (WSM) announced earnings excluding items of $0.95 per share matching estimates from analyst. Revenues at the company came in at $1.08 billion up 7.9%. For the first quarter 2005 the company gave guidance of between $0.18 per share and $0.20 per share, which is in line with estimates from Wall Street. Full year guidance from the company stands at $1.83 to $1.87 per share.
FactSet Research Systems Inc. (FDS) announced that their fiscal second quarter revenues increased 24.6% to $76.5 million from a year ago. Net income increased to $0.34 per share or $17.2 million meeting estimates. The supplier of financial and economic data cited strong demand in Europe and the Pacific Rim for their results.
Electronic Arts (ERTS) surprised the street, when the videogame maker announced earnings warnings. Citing slow sales of their top games and game consoles shortages the company announced that they now forecast earnings of $1.70 to $1.72 per share. Down from the prior $1.90 to $1.95 per share. The company also lowered their full year 2005 guidance.
In economic news the only reports of interest this week besides the increase in the Fed Funds rates was the release of the PPI and CPI numbers. February PPI came in at 0.4% exceeding economist estimates of a 0.3% increase. The core rate which excludes food and energy met estimates of a 0.1% increase. Year over year the core rate is up 2.8% which is the highest increase in ten years. CPI also topped estimates showing a 0.4% increase versus estimates of a 0.3% increase. The core rate also increased more than expected coming in at 0.3%. On the consumer level prices have increased 3.0 % and the core rate is up 2.4% year over year. In coming month economist will be watching closely to see if higher energy cost will cause a spike in these numbers.
Bond interest rates rose across the yield curve this week on the Federal Reserves hike in interest rates and that addition to their policy statement. The 5 year Treasury notes yield increased to 4.29%. The 10 year note increased its yield to 4.59% and the 30 year bond yield closed at 4.84%.
Next week the street again will be watching for any signs of inflation and will sell off on any signs of it. No major companies will be releasing earnings next week to give the market direction. Because of this the market bears once again will have the upper hand.
Companies releasing earnings are Walgreen (WAG), Veritas (VTS), Freddie Mac (FRE) and Best Buy Co. Inc. (BBY).
Subscribe To Morning Coffee
Posts
All Comments
Friday, March 25, 2005
Friday, March 18, 2005
Weekly Market Report 03-18-2005
Energy prices concern market
By Rick Paler
This week was another down week for the market as oil prices continued to climb higher. Another blow to the market this week was General Motors (GM) earnings warning for the quarter and full year. Merger activity continued with its robust pace with several new announcements being made. Economic news was light this week with no earth shattering reports being released. On the earnings front earnings overall continue to impress overall.
Oil was the focus of the market this week with not many news making stocks reporting earnings and no major economic reports released. OPEC announced that it would increase their production by 500,000 barrels a day. This did nothing to curb oil prices, since some traders say that demand will continue to increase faster that supply. Some analysts are suggesting that there is no extra capacity available and that prices will continue to rocket higher. This is a huge drag on the market, since higher energy prices will at some point in the future cause a spike in inflation. Higher inflation will hurt corporate profits and companies will need to pass on cost to consumers. During this current economic recovery it has been consumer spending that has driven the economy from recession. If higher prices are passed on to consumers, this might lead to a slowdown in consumer spending and therefore cause a slowdown in the economy and economic growth. Oil closed the week at $56.72 per barrel up from $54.43 a week earlier.
General Motors (GM) dealt another blow to the market this week when the company announced that they expected a first quarter loss. The company slashed their first quarter target to a $1.50 loss and cut their full year earnings projection to $1.00 to $2.00 per share. The company had given prior full year guidance of a profit of $4.00 to $5.00 per share. The news also hit the bond market, since the company’s bonds are currently rated one level above junk bond status. Several rating agencies have put GM’s debt on credit review and this could lead to a downgrade to junk bond status.
Several mergers were in the news this week. Troubled toy retailer Toy’s “R” Us (TOY) is being purchased by three partners Bain Capital, Kohlberg Kravis Roberts & Co., and Vornado Realty Trust (VNO) for $5.6 billion. International Business Machines (IBM) announced that they would be purchasing Ascential Software (ASCL). Quest Communications (Q) will not take no for an answer. The company confirmed that they had made another bid for MCI (MCIP). The company is now willing to pay $26.00 per share or $8.45 billion up from $24.60. The new offer is well ahead of competitors Verizon Communications (VZ) offer of $6.7 billion.
In earnings news software maker Adobe Systems Inc. (ADBE) posted a 23% gain in their first quarter earnings. The company reported that their first quarter net came in at $151.9 million or $0.60 per share. Excluding items the company made $0.53 per share. Wall Street analyst had only expected the company to make $0.50 per share. The company also said that they planed a major product launch during the second quarter.
FedEx (FDX) posted fiscal third quarter net earnings of $1.03 per share up 51% from a year ago and well above the streets estimates of $0.98 per share. Revenues at the company rose 21% to $7.3 billion. Giving guidance for their fiscal fourth quarter the company expects to earn $1.40 to $1.50 per share.
In economic news, Net Foreign Security Purchases came in well above economist estimates. Purchases came in at $91.5 billion well above the $58.5 to $59.0 billion expected. A lot of worry has surrounded foreign purchases of U.S. debt due to the weakened dollar and deficit. If foreign investors stopped financing our debt interest rates would have to rise to attract investment. Looking closer at the numbers a majority of the investment came from private investors and off shore hedge funds and not foreign countries. Therefore I feel not much can be interrupted by these big numbers.
Oil, GM, and general fear of higher interest rates moved bond rates higher across the yield curve. The 5 year Treasuary note closed yielding 4.15%. Additionally the 10 year Treasury note and 30 year bond both closed at higher yields. The 10 year note yield closed at 4.50% and the 30 year at 4.80%.
Next week again will be light on earnings news. The main focus of the market will be again oil and interest rates. On Tuesday the Federal Reserve will meet and it it’s generally expected that they will raise interest rates for the seventh straight time. Expectations are for a ¼ point hike in rates. Major focus will also be on the policy statement and the possible removal of “measured” rate increases from the statement. Additionally PPI numbers will be released on Tuesday and CPI numbers on Wednesday. Poor reports have the potential to move the market lower.
Earnings reports that will be released next week are Paychex (PAYX), FactSet Research Systems (FDS), Oracle (ORCL) and Williams-Sonoma (WSM).
By Rick Paler
This week was another down week for the market as oil prices continued to climb higher. Another blow to the market this week was General Motors (GM) earnings warning for the quarter and full year. Merger activity continued with its robust pace with several new announcements being made. Economic news was light this week with no earth shattering reports being released. On the earnings front earnings overall continue to impress overall.
Oil was the focus of the market this week with not many news making stocks reporting earnings and no major economic reports released. OPEC announced that it would increase their production by 500,000 barrels a day. This did nothing to curb oil prices, since some traders say that demand will continue to increase faster that supply. Some analysts are suggesting that there is no extra capacity available and that prices will continue to rocket higher. This is a huge drag on the market, since higher energy prices will at some point in the future cause a spike in inflation. Higher inflation will hurt corporate profits and companies will need to pass on cost to consumers. During this current economic recovery it has been consumer spending that has driven the economy from recession. If higher prices are passed on to consumers, this might lead to a slowdown in consumer spending and therefore cause a slowdown in the economy and economic growth. Oil closed the week at $56.72 per barrel up from $54.43 a week earlier.
General Motors (GM) dealt another blow to the market this week when the company announced that they expected a first quarter loss. The company slashed their first quarter target to a $1.50 loss and cut their full year earnings projection to $1.00 to $2.00 per share. The company had given prior full year guidance of a profit of $4.00 to $5.00 per share. The news also hit the bond market, since the company’s bonds are currently rated one level above junk bond status. Several rating agencies have put GM’s debt on credit review and this could lead to a downgrade to junk bond status.
Several mergers were in the news this week. Troubled toy retailer Toy’s “R” Us (TOY) is being purchased by three partners Bain Capital, Kohlberg Kravis Roberts & Co., and Vornado Realty Trust (VNO) for $5.6 billion. International Business Machines (IBM) announced that they would be purchasing Ascential Software (ASCL). Quest Communications (Q) will not take no for an answer. The company confirmed that they had made another bid for MCI (MCIP). The company is now willing to pay $26.00 per share or $8.45 billion up from $24.60. The new offer is well ahead of competitors Verizon Communications (VZ) offer of $6.7 billion.
In earnings news software maker Adobe Systems Inc. (ADBE) posted a 23% gain in their first quarter earnings. The company reported that their first quarter net came in at $151.9 million or $0.60 per share. Excluding items the company made $0.53 per share. Wall Street analyst had only expected the company to make $0.50 per share. The company also said that they planed a major product launch during the second quarter.
FedEx (FDX) posted fiscal third quarter net earnings of $1.03 per share up 51% from a year ago and well above the streets estimates of $0.98 per share. Revenues at the company rose 21% to $7.3 billion. Giving guidance for their fiscal fourth quarter the company expects to earn $1.40 to $1.50 per share.
In economic news, Net Foreign Security Purchases came in well above economist estimates. Purchases came in at $91.5 billion well above the $58.5 to $59.0 billion expected. A lot of worry has surrounded foreign purchases of U.S. debt due to the weakened dollar and deficit. If foreign investors stopped financing our debt interest rates would have to rise to attract investment. Looking closer at the numbers a majority of the investment came from private investors and off shore hedge funds and not foreign countries. Therefore I feel not much can be interrupted by these big numbers.
Oil, GM, and general fear of higher interest rates moved bond rates higher across the yield curve. The 5 year Treasuary note closed yielding 4.15%. Additionally the 10 year Treasury note and 30 year bond both closed at higher yields. The 10 year note yield closed at 4.50% and the 30 year at 4.80%.
Next week again will be light on earnings news. The main focus of the market will be again oil and interest rates. On Tuesday the Federal Reserve will meet and it it’s generally expected that they will raise interest rates for the seventh straight time. Expectations are for a ¼ point hike in rates. Major focus will also be on the policy statement and the possible removal of “measured” rate increases from the statement. Additionally PPI numbers will be released on Tuesday and CPI numbers on Wednesday. Poor reports have the potential to move the market lower.
Earnings reports that will be released next week are Paychex (PAYX), FactSet Research Systems (FDS), Oracle (ORCL) and Williams-Sonoma (WSM).
Friday, March 11, 2005
Weekly Market Report 03-11-2005
Market erases 2005 gains
By Rick Paler
This week the market gave up the slight gains that had been posted for 2005. Overall it was a slow week with few companies reporting earnings and only a limited number of economic reports being released. More mergers were announced this week, as companies look for a place to put their cash. Boeing fired their CEO after having a relationship with a co-worker and bond yields rose on inflation worries.
There were no market moving earnings reports this week, but the technology sector had both Intel (INTC) and Texas Instruments (TXN) give their mid-quarter guidance reports.
Technology bellwether Intel (INTC) reported that they were raising their prior guidance due to lower than expected manufacturing cost. The chip maker now expects revenues of $9.2 billion to $9.4 billion up from their prior guidance of $8.8 billion to $9.4 billion range. They also now expect gross margins of 57% up from the prior forecast of 55%.
Texas Instruments (TXN) gave disappointing guidance, when the announced they were lowering the upper end of their earnings guidance to $0.22 per share to $0.24 per share. Prior expectations from the company were $0.22 per share to $0.26 per share. The company also lowered their revenue guidance for the quarter to $2.91 billion to $3.03 billion. Share of the company were down 5% on the news.
Hamburger joints reported same store-sales this week. McDonalds (MCD) reported that U.S. same-store sales increased 4.6% in February, but the strong U.S. sales growth was offset by weaker than expected overseas sales. Sale in Europe decrease of 3.4%. Overall worldwide sales increased only 1.6%.
Competitor Wendy’s (WEN) had worst results. The company reported that their corporate same-store sales fell 2.4% in February.
Eastman Chemical (EMN) announced that it expects to beat Wall Street’s earnings estimates. The chemical company cited higher selling prices and strong demands when it said that it now forecast earnings in excess of analyst high estimate of $1.19 per share. The streets average estimate for the company was only $0.89 per share.
Boeing (BA) announced this week that the board of directors had fired CEO Harry Stonecipher for having a relationship with a female co-worker. Citing Mr. Stonecipher’s poor judgment and the impairment of his ability to run the company, the board announced that CFO James Bell had been appointed president and CEO of the company.
Capital One Financial (COF) reported that they would purchase Hibernia (HIB) in a cash and stock deal worth $5.3 billion. The acquisition will give the company branch locations in both Texas and Louisiana.
The only real economic news this week was the release of trade deficit numbers. The January trade deficit rose to $58.3 billion, above economist forecast of -$56.8 billion. This was the second highest reading ever. The highest trade deficit was back in November of 2004.
The report combined with higher oil prices caused renewed fears of inflation and a more aggressive Federal Reserve stance on raising interest rates. This led traders to sell of their stock positions and bond yields to spike higher. The 10 year Treasury notes yield rose to 4.54%. This is due to the fact that higher interest rates would slow the economy down and be a drag on the stock market, since corporate earnings and valuations would be effected.
Next week should be a replay of this past week. Traders will be watching for any sign of increased inflation, including higher oil prices. If there are signs of inflation or higher oil prices look for the market to trade lower and bond yields to rise. In the coming weeks mid-quarter earnings warnings could also have an effect on the market.
Companies reporting earnings next week are; OfficeMax (OMX), Bayer (BAY), King Pharmaceuticals (KG), Ross Stores (ROST) and FedEx (FDX).
By Rick Paler
This week the market gave up the slight gains that had been posted for 2005. Overall it was a slow week with few companies reporting earnings and only a limited number of economic reports being released. More mergers were announced this week, as companies look for a place to put their cash. Boeing fired their CEO after having a relationship with a co-worker and bond yields rose on inflation worries.
There were no market moving earnings reports this week, but the technology sector had both Intel (INTC) and Texas Instruments (TXN) give their mid-quarter guidance reports.
Technology bellwether Intel (INTC) reported that they were raising their prior guidance due to lower than expected manufacturing cost. The chip maker now expects revenues of $9.2 billion to $9.4 billion up from their prior guidance of $8.8 billion to $9.4 billion range. They also now expect gross margins of 57% up from the prior forecast of 55%.
Texas Instruments (TXN) gave disappointing guidance, when the announced they were lowering the upper end of their earnings guidance to $0.22 per share to $0.24 per share. Prior expectations from the company were $0.22 per share to $0.26 per share. The company also lowered their revenue guidance for the quarter to $2.91 billion to $3.03 billion. Share of the company were down 5% on the news.
Hamburger joints reported same store-sales this week. McDonalds (MCD) reported that U.S. same-store sales increased 4.6% in February, but the strong U.S. sales growth was offset by weaker than expected overseas sales. Sale in Europe decrease of 3.4%. Overall worldwide sales increased only 1.6%.
Competitor Wendy’s (WEN) had worst results. The company reported that their corporate same-store sales fell 2.4% in February.
Eastman Chemical (EMN) announced that it expects to beat Wall Street’s earnings estimates. The chemical company cited higher selling prices and strong demands when it said that it now forecast earnings in excess of analyst high estimate of $1.19 per share. The streets average estimate for the company was only $0.89 per share.
Boeing (BA) announced this week that the board of directors had fired CEO Harry Stonecipher for having a relationship with a female co-worker. Citing Mr. Stonecipher’s poor judgment and the impairment of his ability to run the company, the board announced that CFO James Bell had been appointed president and CEO of the company.
Capital One Financial (COF) reported that they would purchase Hibernia (HIB) in a cash and stock deal worth $5.3 billion. The acquisition will give the company branch locations in both Texas and Louisiana.
The only real economic news this week was the release of trade deficit numbers. The January trade deficit rose to $58.3 billion, above economist forecast of -$56.8 billion. This was the second highest reading ever. The highest trade deficit was back in November of 2004.
The report combined with higher oil prices caused renewed fears of inflation and a more aggressive Federal Reserve stance on raising interest rates. This led traders to sell of their stock positions and bond yields to spike higher. The 10 year Treasury notes yield rose to 4.54%. This is due to the fact that higher interest rates would slow the economy down and be a drag on the stock market, since corporate earnings and valuations would be effected.
Next week should be a replay of this past week. Traders will be watching for any sign of increased inflation, including higher oil prices. If there are signs of inflation or higher oil prices look for the market to trade lower and bond yields to rise. In the coming weeks mid-quarter earnings warnings could also have an effect on the market.
Companies reporting earnings next week are; OfficeMax (OMX), Bayer (BAY), King Pharmaceuticals (KG), Ross Stores (ROST) and FedEx (FDX).
Friday, March 04, 2005
Weekly Market Report 03-04-2005
Dow Jones Industrial surpasses 2001 levels
By Rick Paler
Despite a surge in oil prices this week, the Dow Jones Industrial index passed the 10,900 level for the first time since 2001. All the major indices were positive for the week yet the volatile NASDAQ continues to trade in the red for the year. Economic data for the week was fairly positive along with Greenspan’s comments before the House Banking Committee. Earnings came in strong for the week, but several companies gave earnings warnings. Biogen Idec along with Elan Plc got hammered by investors when it was announced that they would pull a drug from the market.
Oil prices continue to be a major concern on Wall Street, since higher oil prices act as a tax on the economy. This tax has the potential to slow the economy to the point of another potential recession. Even worse it could not only slow the economy, but cause a rapid spike in inflation. Do you remember the nightmare of the 1970’s and stagflation, when the economy did nothing while inflation was out of control? World demand is continuing to rise and the weaker dollar is not helping matters. This is because oil is traded in U.S. dollars and a weaker dollar makes foreign goods more expensive. To maintain purchasing power in Europe, oil producing countries have to raise the price of oil. OPEC’s Secretary General said he believes that oil will be trading at $80 dollars a barrel within the next two years and some analyst are projecting $100 dollars per barrel.
There was more bad news in the pharmaceutical sector when Biogen Idec (BIIB) and Elan Plc (ELN) announced that they would be pulling Tysabri from the market. This was announced after two patients taking the drug in combination with Avonex developed sever neurological problems and one patient died. Both companies stock got hammered on news.
Retail companies giant Wal-Mart (WMT) reported their February same-store sales numbers increased 4.1% and indicated that they expected the same or better numbers for March. The company also increased their dividend 15.4%.
TJX Companies also reported strong same-store sales increases. Same-store sales at the company increased 6% in February exceeding Wall Streets estimates of only a 5.1% increase. Total sales at the retailer also increased 12%. Giving guidance the company said that it expected to earn $0.32 to $0.34 per share for the first quarter.
Costco Wholesale Corp. (COST) reported same-store sales increased 7% and that earnings excluding items missed analyst’s estimates by a penny. The company reported earnings of $0.54 per share. Wall Street was also disappointed with the company’s future guidance.
American Eagle Outfitters (AEOS) reported that their February same-store sales surged upwards 32.4%. The company also had a very good earnings report for the fourth quarter. The clothing retailer reported earnings of $1.40 per share exceeding the streets estimates. The retailer also upped their guidance for the first quarter to $0.52 to $0.54 per share from the prior $0.43 to $0.45 per share.
H.J. Heinz (HNZ) reported earnings excluding items of $0.60 per share coming in above estimates of $0.59 per share as strong U.S. sales helped raise overall sales up 7.8%. Giving guidance for the next quarter the company said that it expected to earn $2.32 to $2.42 per share.
Merger mania continued this week with Johnson & Johnson agreeing to acquire Closure Medical Corp. (CLSR) for $27 in cash for each outstanding share. Federated Department Stores (FD) announced they are purchasing May Department Stores (MAY) for $17 billion including debt. Yellow Roadway (YELL) will purchase USF Corp (USFC) the transportation company will pay $1.37 billion in cash. Finally Quest (Q) has not given up on their effort to purchase MCI (MCIP). MCI has already agreed to be acquired by Verizon (VZ) yet Quest stated this week that they are willing to continue further negotiations.
In economic news this week, Alan Greenspan testified before the House Budget Committee and focused his comments on the budget deficit and Social Security reform. He continues to see the US economy expanding at a reasonable pace, but warned that the budget deficit could slow growth. He also said that he supports social security reform combined with private accounts. Mr. Greenspan commented that the current system for retirement needs to be revamped “sooner rather than later.”
This week we saw a stronger than expected Chicago Purchasing Managers Index, and a very strong February non-farm payrolls report. The report blew away economist estimates of 225,000 coming in at 262,000 new jobs. Given the current economic data economist are expecting the economy to continue with its solid growth through the first half of the year. Economist are now projecting the GDP growth of between 3 ½% to 4%.
Bond yields fell this week with the 5 year Treasury note closing the week at 3.95%. The 10 year Treasury note closed yielding 4.30% and the 30 year bond closed at 4.64%.
Once again, I will state that next weeks trading will revolve around oil prices and the fear that higher energy cost will cause the Federal Reserve to raise interest rates more aggressively to head off inflation. Expect to see more merger and acquisition announcements, stock repurchase plans and dividend increases in coming weeks since companies are sitting on record levels of cash.
Companies releasing earnings next week are; Checkpoint Systems (CKP), Tenet Healthcare (THC), The Kroger Co. (KR), and BASF (BF).
By Rick Paler
Despite a surge in oil prices this week, the Dow Jones Industrial index passed the 10,900 level for the first time since 2001. All the major indices were positive for the week yet the volatile NASDAQ continues to trade in the red for the year. Economic data for the week was fairly positive along with Greenspan’s comments before the House Banking Committee. Earnings came in strong for the week, but several companies gave earnings warnings. Biogen Idec along with Elan Plc got hammered by investors when it was announced that they would pull a drug from the market.
Oil prices continue to be a major concern on Wall Street, since higher oil prices act as a tax on the economy. This tax has the potential to slow the economy to the point of another potential recession. Even worse it could not only slow the economy, but cause a rapid spike in inflation. Do you remember the nightmare of the 1970’s and stagflation, when the economy did nothing while inflation was out of control? World demand is continuing to rise and the weaker dollar is not helping matters. This is because oil is traded in U.S. dollars and a weaker dollar makes foreign goods more expensive. To maintain purchasing power in Europe, oil producing countries have to raise the price of oil. OPEC’s Secretary General said he believes that oil will be trading at $80 dollars a barrel within the next two years and some analyst are projecting $100 dollars per barrel.
There was more bad news in the pharmaceutical sector when Biogen Idec (BIIB) and Elan Plc (ELN) announced that they would be pulling Tysabri from the market. This was announced after two patients taking the drug in combination with Avonex developed sever neurological problems and one patient died. Both companies stock got hammered on news.
Retail companies giant Wal-Mart (WMT) reported their February same-store sales numbers increased 4.1% and indicated that they expected the same or better numbers for March. The company also increased their dividend 15.4%.
TJX Companies also reported strong same-store sales increases. Same-store sales at the company increased 6% in February exceeding Wall Streets estimates of only a 5.1% increase. Total sales at the retailer also increased 12%. Giving guidance the company said that it expected to earn $0.32 to $0.34 per share for the first quarter.
Costco Wholesale Corp. (COST) reported same-store sales increased 7% and that earnings excluding items missed analyst’s estimates by a penny. The company reported earnings of $0.54 per share. Wall Street was also disappointed with the company’s future guidance.
American Eagle Outfitters (AEOS) reported that their February same-store sales surged upwards 32.4%. The company also had a very good earnings report for the fourth quarter. The clothing retailer reported earnings of $1.40 per share exceeding the streets estimates. The retailer also upped their guidance for the first quarter to $0.52 to $0.54 per share from the prior $0.43 to $0.45 per share.
H.J. Heinz (HNZ) reported earnings excluding items of $0.60 per share coming in above estimates of $0.59 per share as strong U.S. sales helped raise overall sales up 7.8%. Giving guidance for the next quarter the company said that it expected to earn $2.32 to $2.42 per share.
Merger mania continued this week with Johnson & Johnson agreeing to acquire Closure Medical Corp. (CLSR) for $27 in cash for each outstanding share. Federated Department Stores (FD) announced they are purchasing May Department Stores (MAY) for $17 billion including debt. Yellow Roadway (YELL) will purchase USF Corp (USFC) the transportation company will pay $1.37 billion in cash. Finally Quest (Q) has not given up on their effort to purchase MCI (MCIP). MCI has already agreed to be acquired by Verizon (VZ) yet Quest stated this week that they are willing to continue further negotiations.
In economic news this week, Alan Greenspan testified before the House Budget Committee and focused his comments on the budget deficit and Social Security reform. He continues to see the US economy expanding at a reasonable pace, but warned that the budget deficit could slow growth. He also said that he supports social security reform combined with private accounts. Mr. Greenspan commented that the current system for retirement needs to be revamped “sooner rather than later.”
This week we saw a stronger than expected Chicago Purchasing Managers Index, and a very strong February non-farm payrolls report. The report blew away economist estimates of 225,000 coming in at 262,000 new jobs. Given the current economic data economist are expecting the economy to continue with its solid growth through the first half of the year. Economist are now projecting the GDP growth of between 3 ½% to 4%.
Bond yields fell this week with the 5 year Treasury note closing the week at 3.95%. The 10 year Treasury note closed yielding 4.30% and the 30 year bond closed at 4.64%.
Once again, I will state that next weeks trading will revolve around oil prices and the fear that higher energy cost will cause the Federal Reserve to raise interest rates more aggressively to head off inflation. Expect to see more merger and acquisition announcements, stock repurchase plans and dividend increases in coming weeks since companies are sitting on record levels of cash.
Companies releasing earnings next week are; Checkpoint Systems (CKP), Tenet Healthcare (THC), The Kroger Co. (KR), and BASF (BF).
Subscribe to:
Posts (Atom)