Beginning of a summer rally?
By Rick Paler
What a great week we had. All the major indices were up as traders flocked into the market not wanting to be left behind. Wall Street was highlighted by lower oil prices, lowered expectations for inflation, M&A activity, and strong earnings. This allowed the bulls to stampede into an oversold market looking for bargains.
In corporate news this week H.J. Heinz Company (HNZ) announced that its Board of Directors approved a 5.3% increase in the company’s dividend. William Johnson Chairman, President and CEO at Heinz said “This increase reflects the health of our core business, both U.S. and abroad and our strong cash performance. It also represents our commitment to return 45% to 50% of our earnings to shareholders in the form of a dividend.” The new dividend yield puts Heinz in the top 20% of S&P 500 companies paying dividends.
Home Depot’s (HD) earnings blew past Wall Streets estimates when the retailer announced that they had earned $0.60 for the quarter. Analysts had expected earnings to come in at only $0.55 per share. Sales grew a healthy 8.1% to $19.29 billion, which also exceeded estimates. These results include the poor weather experienced in March, which competitor Lowe’s Cos (LOW) citied when it missed their earnings target.
Abercrombie & Fitch (ANF) reported better than expected earnings. The apparel retailer posted earnings of $0.45 per share or $40.4 million. Analysts on average had expected $0.42 per share. Same store sales increased 19%, while their trendy Hollister stores that cater to a younger hip crowd saw their sales jump 71%.
M&A news continues to spring up almost daily. I have mentioned on several occasions that corporations are flooded with cash and are looking for places to put the cash to use. This week United Parcels Services (UPS) announced that they would acquire Overnight Corp. (OVNT) at a 45% premium over the previous day’s closing price. The all cash deal is valued at $1.25 billion. Wall Street applauded the deal by pushing UPS shares higher.
Appliance manufacture Maytag Corp. (MYG) is being acquired by a private equity group led by Ripplewood Holdings LLC. The group offered $14.00 per share or $2 billion with the assumption of debt for the company.
Continental AG (CON.XE) a German tire manufacture and parts supplier denied rumors that it was interested in purchasing Autoliv (ALV). Traders had speculated that the company had been interested after an analyst report stated that the company would make a bid for Autoliv.
Economic news this week helped to easy fears of uncontrolled inflation. Both the Producers Price Index and the Consumers Price Index were released this week and neither indicated that inflation was a problem. The PPI came in fractionally higher than anticipated. The April reading was 0.6% versus an estimate of 0.4%. The core rate which excludes food and energy came in at 0.3%. The April CPI number was 0.5% with the core rate at 0.2%. Just a few weeks ago many on Wall Street thought that inflation was picking up and these reports dispelled those thoughts.
The economy does appear to be cooling off in the manufacturing sector. The May Empire Manufacturing Index fell into negative territory. The index which measures manufacturing in the New York region dropped into negative territory with a reading of -11.1. Economist had estimated manufacturing in the region to grow to 11.7. This was the first negative reading since April 2003.
This was followed up by a worse than expected Philly Fed’s Business Activity Index. The index fell from 25.3 in April to 7.3 in May. Economist had anticipated a decline in the region but only to 17.3.
It is my belief that the economy is in fact cooling off. The Federal Reserves interest rate hikes appear to have slowed the economy and hedge inflation. The question is has the Federal Reserve raised rates to much? The bond market thinks so and it is indicated by the flat yield curve. As a general rule it takes six to nine months before an interest rate hike is felt in the economy. I do believe that at the next FOMC meeting the Federal Reserve will raise rates again another 25 basis points. Although after the June meeting I believe that the Federal Reserve will take a breather and wait before taking additional action.
The 5 year Treasury note closed yielding 3.86%. The 10 year Treasury note was yielding 4.12% at the close this week and the 30 year bond ended with a yield of 4.43%.
Next week the street will be watching to see if the market can continue this rally. Traders will also be waiting for the release of the Fed’s minutes from the last FOMC meeting. Companies releasing earnings are as follows; Campbell Soup (CPB), Toro (TTC), PETCO (PETC), Costco Wholesale (COST), H.J. Heinz Company (HZN), Hormel Foods Corp. (HRL), Patterson Dental (PDCO) and Toll Brothers (TOL).
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Friday, May 20, 2005
Monday, May 09, 2005
Bears drive markets lower
By Rick Paler
Despite continued positive earnings reports and good economic news the market ended the week lower. Oil prices also should have helped the market, since the price per barrel continued its decline but the market was unfazed by the decline. The NASDQ was helped by Cisco and Dell who both reported good earnings reports. Economic reports released were better than what economist had expected. Yet three of the four major indices posted losses for the week.
In general news, mergers continue to be announced. This week Ameritrade Holdings Corp. (AMTD) shares soared when it was reported that E*Trade Financial Corp. (ET) had expressed interest in buying the company. CEO and founder Joseph Moglia stated that the company was not for sale and that “we are confident in our management team and its strategy.” Wall Street analysts believe that the merger would be a good thing for both companies.
Duke Energy (DUK) announced that they were going to acquire Cinergy Corp (CIN) in an all stock deal for $9 billion. Additionally Duke raised its dividend 12.7% to $1.24 per share.
Quest Communications (Q) will not just go away. It was reported this week that Quest was taking its bid for MCI Inc. (MCIP) directly to the MCI shareholders. Their attempt is to block rival Verizon Communications (VZ) bid for the company.
All eyes were on Cisco Systems (CSCO) this week, since a good earnings report would give support to the technology sector. Cisco did not disappoint traders when they reported better than expected fiscal third quarter earnings. The tech bellwether reported earnings of $0.32 per share which was a penny better than expectations. Revenues grew 10% at the company to $6.19 billion. Additionally the company said that orders topped shipments for the first time in two years.
Dell (DELL) gave an upbeat outlook this week when it posted earnings inline with analyst estimates. The company earned $0.37per share on revenues of $13.42 billion. The company also said that it sees revenue growth of between 16% and 18% for 2005.
Tiffany & Co. (TIF) posted better than expected results. The company reported first quarter earnings of $0.26 per share on revenues of $510 million. The company cited strong U.S. sales. They also reaffirmed their 2005 guidance of $1.45 to $1.55 per share.
Target (TGT) announced that their first quarter income rose 26% to $494 million or $0.55 per share a penny ahead of the streets estimates. Revenues at the retailer grew 12.7% to $11.5 billion and same store sales grew a healthy 6.2%.
In economic news, the March trade deficit unexpectedly narrowed. Economist had expected the deficit to rise to $61.9 billion instead it came in at a low $55 billion. Imports declined to $157.2 billion or 2.5% while exports rose to $102.2 billion or 1.5%. It seems as if the weaker dollar is finally spurring exports while higher oil prices have slowed U.S. consumer demand. This is based on this week’s preliminary University of Michigan consumer sentiment for May. Economist had expected to rise in sentiment to 88.2 from last months 87.7 instead it fell to surprising 85.3.
April retail sales were much stronger then economist had expected. The Commerce Department reported that April sales rose 1.4% the largest gain in over seven months. Wall Street economist had estimated a gain of only 0.7%.
Bond yields slipped this week across the yield curve. The 5 year Treasury note fell to 3.81%. While the 10 year note fell to 4.11% and the 30 year bond closed at 4.46%.
The stock market continues to be volatile despite good fundamentals. The economy continues to grow nicely and the first quarter GDP will likely be revised upward from the original 3.1%. Oil prices have caused some of the volatility along with the fear of inflation and the possibility that the Federal Reserve will raise rates to quickly thereby causing the economy to stall. The positive I see in the recent volatility has been the strong corporate earnings. The strong earning combined with a sideways market has caused the overall P/E ratio for the S&P 500 to fall from a lofty 20.2 to a more reasonable 16.8. Given the current conditions it is still my expectation the market will post positive numbers by years end.
Next week traders will be watch for the release of two economic reports. Both the PPI and CPI will be released and any signs of unchecked inflation will cause a sell off in the market. While a lower than expected number could spark a rally.
Companies releasing earning next week that are of interest are the following. Lowe’s Companies (LOW), Abercrombie & Fitch Co. (ANF), Deere & Co. (DE), Hewlett-Packard (HPQ), Home Depot (HD), and The TJX Companies (TJX).
By Rick Paler
Despite continued positive earnings reports and good economic news the market ended the week lower. Oil prices also should have helped the market, since the price per barrel continued its decline but the market was unfazed by the decline. The NASDQ was helped by Cisco and Dell who both reported good earnings reports. Economic reports released were better than what economist had expected. Yet three of the four major indices posted losses for the week.
In general news, mergers continue to be announced. This week Ameritrade Holdings Corp. (AMTD) shares soared when it was reported that E*Trade Financial Corp. (ET) had expressed interest in buying the company. CEO and founder Joseph Moglia stated that the company was not for sale and that “we are confident in our management team and its strategy.” Wall Street analysts believe that the merger would be a good thing for both companies.
Duke Energy (DUK) announced that they were going to acquire Cinergy Corp (CIN) in an all stock deal for $9 billion. Additionally Duke raised its dividend 12.7% to $1.24 per share.
Quest Communications (Q) will not just go away. It was reported this week that Quest was taking its bid for MCI Inc. (MCIP) directly to the MCI shareholders. Their attempt is to block rival Verizon Communications (VZ) bid for the company.
All eyes were on Cisco Systems (CSCO) this week, since a good earnings report would give support to the technology sector. Cisco did not disappoint traders when they reported better than expected fiscal third quarter earnings. The tech bellwether reported earnings of $0.32 per share which was a penny better than expectations. Revenues grew 10% at the company to $6.19 billion. Additionally the company said that orders topped shipments for the first time in two years.
Dell (DELL) gave an upbeat outlook this week when it posted earnings inline with analyst estimates. The company earned $0.37per share on revenues of $13.42 billion. The company also said that it sees revenue growth of between 16% and 18% for 2005.
Tiffany & Co. (TIF) posted better than expected results. The company reported first quarter earnings of $0.26 per share on revenues of $510 million. The company cited strong U.S. sales. They also reaffirmed their 2005 guidance of $1.45 to $1.55 per share.
Target (TGT) announced that their first quarter income rose 26% to $494 million or $0.55 per share a penny ahead of the streets estimates. Revenues at the retailer grew 12.7% to $11.5 billion and same store sales grew a healthy 6.2%.
In economic news, the March trade deficit unexpectedly narrowed. Economist had expected the deficit to rise to $61.9 billion instead it came in at a low $55 billion. Imports declined to $157.2 billion or 2.5% while exports rose to $102.2 billion or 1.5%. It seems as if the weaker dollar is finally spurring exports while higher oil prices have slowed U.S. consumer demand. This is based on this week’s preliminary University of Michigan consumer sentiment for May. Economist had expected to rise in sentiment to 88.2 from last months 87.7 instead it fell to surprising 85.3.
April retail sales were much stronger then economist had expected. The Commerce Department reported that April sales rose 1.4% the largest gain in over seven months. Wall Street economist had estimated a gain of only 0.7%.
Bond yields slipped this week across the yield curve. The 5 year Treasury note fell to 3.81%. While the 10 year note fell to 4.11% and the 30 year bond closed at 4.46%.
The stock market continues to be volatile despite good fundamentals. The economy continues to grow nicely and the first quarter GDP will likely be revised upward from the original 3.1%. Oil prices have caused some of the volatility along with the fear of inflation and the possibility that the Federal Reserve will raise rates to quickly thereby causing the economy to stall. The positive I see in the recent volatility has been the strong corporate earnings. The strong earning combined with a sideways market has caused the overall P/E ratio for the S&P 500 to fall from a lofty 20.2 to a more reasonable 16.8. Given the current conditions it is still my expectation the market will post positive numbers by years end.
Next week traders will be watch for the release of two economic reports. Both the PPI and CPI will be released and any signs of unchecked inflation will cause a sell off in the market. While a lower than expected number could spark a rally.
Companies releasing earning next week that are of interest are the following. Lowe’s Companies (LOW), Abercrombie & Fitch Co. (ANF), Deere & Co. (DE), Hewlett-Packard (HPQ), Home Depot (HD), and The TJX Companies (TJX).
Friday, May 06, 2005
Weekly Market Report 05-06-2005
GM’s bonds at junk status
By Rick Paler
Overall it was a decent week for the markets. Corporate earnings continue to come in very strong and economic reports indicate that the economy is still growing, while inflation seems to be under control. In corporate news both General Motors and Ford had their debt downgraded by Standard & Poor’s. The big news economically this week was the Federal Reserve’s meeting and the Non-farm payroll numbers.
General Motors (GM) hit the headlines twice this week, first when it was announced that Kirk Kerkorian’s Tracinda Corp. offered to purchase 28 million shares of GM at $31.00 per share. Shares of the company moved higher on the news. Upon completion of the deal Tracinda Corp will double its holdings of GM to 8.8%. Then GM hit the news again when Standard & Poor’s downgraded the company’s debt to junk bond status. The rating agency also announced that Ford Motor Company’s (F) debt was also lowered to junk status. Both companies are being hurt by out of control pension and healthcare cost.
Tyco International (TYC) shares fell sharply after the company reduced their full year guidance at the high end from $1.98 to $1.93 per share. The company also reported that their fiscal second quarter earnings came in at $0.48 per share on revenues of $10.5 billion.
Abercrombie & Fitch Co. (ANF) reported that their April same store sales grew 16% well ahead of the streets estimate of 12.2% growth. Total sales at the company grew an impressive 31% to $159.4 million.
American Eagle Outfitters Inc. (AEOS) also reported very good April same store sales. The hot retailer saw same store sales rise 20% for April and total sales rose 30.3% to $142.5 million. The retailer also increased their first quarter earnings guidance to $0.34 per share.
Berkshire Hathaway Inc (BRKA) (BRKB) saw a decline in earnings for the first quarter. Warren Buffet’s company reported earnings of $886,000 per share of class A common. Revenues at the company rose to $17.63 billion. The company also announced that its General Re unit had received a Wells Notice from the SEC. The SEC is looking into transactions between General Re and American International Group Inc. (AIG).
In economic news this week all eyes were on the FOMC meeting to see if the Federal Reserve would raise interest rates for the eighth straight time. The Federal Reserve did raise interest rates a ¼ percent increasing the Fed Funds rate to 3.0%. Also of importance was the Feds wording. Traders had feared that the Fed would remove the policy statement of “accommodation”. Removal of the statement would indicate that the Federal Reserve would act more quickly in raising interest rates to head off inflation. Some economists now believe that the Federal Reserve will continue to raise interest rates until the Fed Funds rate is at 3 3/4% to 4% by year end.
Non-farm payrolls surprised economist on the upside this week. Expectations for the April employment report were for 175,000 new jobs. The actual figure came in at 274,000 new jobs, signaling continued economic growth.
On a side note the Treasury Department announced that an advisory committee was reviewing the return of the 30 year Treasury bond. The bond had been discontinued back in 2001.
Treasury yields rose across the yield curve with the 5 year notes yield closing at 3.94%. The 10 year note closed at 4.26% and the 30 year bond closed at 4.62%.
Earnings for the quarter have been very strong and now stand at 14% growth for the S&P 500 as a whole. Expectations are also good for the second quarter with analyst estimating earnings growth of 8% for the S&P 500.
This week the following companies will be releasing earnings reports. Bayer (BAY), Cisco Systems (CSCO), Walt Disney (DIS), Dell Inc. (DELL), Kohl’s (KSS), Wal-Mart Stores (WMT), and Tiffany & Co. (TIF).
By Rick Paler
Overall it was a decent week for the markets. Corporate earnings continue to come in very strong and economic reports indicate that the economy is still growing, while inflation seems to be under control. In corporate news both General Motors and Ford had their debt downgraded by Standard & Poor’s. The big news economically this week was the Federal Reserve’s meeting and the Non-farm payroll numbers.
General Motors (GM) hit the headlines twice this week, first when it was announced that Kirk Kerkorian’s Tracinda Corp. offered to purchase 28 million shares of GM at $31.00 per share. Shares of the company moved higher on the news. Upon completion of the deal Tracinda Corp will double its holdings of GM to 8.8%. Then GM hit the news again when Standard & Poor’s downgraded the company’s debt to junk bond status. The rating agency also announced that Ford Motor Company’s (F) debt was also lowered to junk status. Both companies are being hurt by out of control pension and healthcare cost.
Tyco International (TYC) shares fell sharply after the company reduced their full year guidance at the high end from $1.98 to $1.93 per share. The company also reported that their fiscal second quarter earnings came in at $0.48 per share on revenues of $10.5 billion.
Abercrombie & Fitch Co. (ANF) reported that their April same store sales grew 16% well ahead of the streets estimate of 12.2% growth. Total sales at the company grew an impressive 31% to $159.4 million.
American Eagle Outfitters Inc. (AEOS) also reported very good April same store sales. The hot retailer saw same store sales rise 20% for April and total sales rose 30.3% to $142.5 million. The retailer also increased their first quarter earnings guidance to $0.34 per share.
Berkshire Hathaway Inc (BRKA) (BRKB) saw a decline in earnings for the first quarter. Warren Buffet’s company reported earnings of $886,000 per share of class A common. Revenues at the company rose to $17.63 billion. The company also announced that its General Re unit had received a Wells Notice from the SEC. The SEC is looking into transactions between General Re and American International Group Inc. (AIG).
In economic news this week all eyes were on the FOMC meeting to see if the Federal Reserve would raise interest rates for the eighth straight time. The Federal Reserve did raise interest rates a ¼ percent increasing the Fed Funds rate to 3.0%. Also of importance was the Feds wording. Traders had feared that the Fed would remove the policy statement of “accommodation”. Removal of the statement would indicate that the Federal Reserve would act more quickly in raising interest rates to head off inflation. Some economists now believe that the Federal Reserve will continue to raise interest rates until the Fed Funds rate is at 3 3/4% to 4% by year end.
Non-farm payrolls surprised economist on the upside this week. Expectations for the April employment report were for 175,000 new jobs. The actual figure came in at 274,000 new jobs, signaling continued economic growth.
On a side note the Treasury Department announced that an advisory committee was reviewing the return of the 30 year Treasury bond. The bond had been discontinued back in 2001.
Treasury yields rose across the yield curve with the 5 year notes yield closing at 3.94%. The 10 year note closed at 4.26% and the 30 year bond closed at 4.62%.
Earnings for the quarter have been very strong and now stand at 14% growth for the S&P 500 as a whole. Expectations are also good for the second quarter with analyst estimating earnings growth of 8% for the S&P 500.
This week the following companies will be releasing earnings reports. Bayer (BAY), Cisco Systems (CSCO), Walt Disney (DIS), Dell Inc. (DELL), Kohl’s (KSS), Wal-Mart Stores (WMT), and Tiffany & Co. (TIF).
Friday, April 22, 2005
Weekly Market Report 04-22-2005
Earnings Strong, Economic Reports Poor
By Rick Paler
This week has been a rollercoaster ride for investors. As expected Wall Street continued to ignore positive earnings news and focus on economic reports that give indications on inflation and the economy. Mergers continued to be announced this week, giving some reason for the bulls to come out of hibernation.
One third of the S&P 500 companies have reported earnings for the first quarter. Earnings continue to come in very strong causing the street to up their estimates for the quarter. Just a few weeks ago analyst had expected the S&P 500 to post earnings growth of 7%. Now it stands at 8.6% and some analyst are expecting double digit growth year over year for the index. Strong earnings reports came from the likes of Coca-Cola, Johnson & Johnson, Pfizer, Amgen, Kinder Morgan Inc., and Sherwin-Williams. Each company beat the streets earnings estimates for the quarter.
Coca-Cola Co. (KO) beat analyst earnings estimates of $0.43 per share posting $0.47 per share excluding items, causing the stock price to jump 3.5% on the news. Revenues at the beverage company also rose 4% to $5.27 billion. Worldwide case volume increased 3% but North American sale remain soft.
Johnson & Johnson (JNJ) posted first quarter earnings of $0.97 beating the streets estimate of only $0.92 per share. Sales at the company grew a strong 11% to $12.8 billion. Additionally, the company upped their full year 2005 guidance.
Pharmaceutical giant Pfizer (PFE) reported first quarter earnings of $0.54 per share a penny ahead of Wall Streets estimates. Revenues at the company grew by 5% to $13.09 billion. Giving guidance for the full year, the company reduced its outlook to $1.04 from $1.16. The suspension of the company’s anti-arthritis drug Bextra and questions about Celebrex continue to hurt the company.
Amgen Inc.’s (AMGN) earnings came in higher then expected for the first quarter. Earnings came in at $0.72 per share and revenues grew to $2.83 billion or 21%. Revenue estimates for the company had been $2.88 billion. 2005 earnings guidance for the company is $2.80 to $2.90 per share.
Kinder Morgan Inc. (KMI) announced this week that they would increase their dividend to $0.76 per share or 8%. Additionally the company increased their share buyback program to $800 million from $750 million. Earnings for the first quarter were $1.16 per share, while revenues came in at $336.9 million. Analysts were looking for earnings of $1.15 per share.
Paint manufacture Sherwin-Williams Co. (SHW) continues to ride the housing wave. Net income at the company increased 62% for the quarter. The company earned $0.58 per share, besting estimates of only $0.55 per share. Sale increased to $1.54 billion or 17%.
Mergers news continues to excite investors as the New York Stock Exchange announced that they would acquire Archipelago Holdings (AX). The nation’s oldest exchange would become a publicly traded company if the deal goes through. By acquiring Archipelago the NYSE would move into electronic trading and possibly offer longer trading hours.
Adobe Systems Inc. (ADBE) announced a deal to purchase Macromedia Inc. (MACR) in an all stock deal estimated at $3.4 billion. Shareholders of Macromedia will receive 0.69 shares of Adobe.
The oracle of Wall Street Warren Buffett‘s company Berkshire Hathaway Inc. (BRKA) (BRKB) and Anheuser-Bush Cos. (BUD) this week announced that Berkshire Hathaway had taken a large position in the company. Neither company released any details, but said that Berkshire Hathaway had become a “significant” shareholder. Shares of Anheuser-Bush shot up 5.3% on the news.
Traders concerned about inflation and the economy had some very important reports to digest this week. The PPI, CPI and Federal Reserves Beige Book were all released. Starting the week off was a better than expected PPI report. The core rate of the Producers Price Index, an index which measures inflation at the wholesale level came in at 0.1% versus economist estimates of 0.2%. This gave the market a reason to rally since it appeared that inflation was under control. This was followed up by the CPI, which measures inflation at the consumer level. The CPI core rate showed the largest increase since October of last year. The March Consumer Price Index was up 0.6%, economist were looking for 0.5% and the core rate increased 0.4% versus estimated of only 0.2%. The Federal Reserves Beige Book, a report that gives insight into the economy had two bad comments that traders focused on. The report said that “upward price pressures have strengthened” and that “high energy prices were already, or could soon be, damping consumer demand”. Both the poor CPI and Fed Beige Book caused the market to give up the gains it had received from the good PPI report.
Bond rates for the week were higher on the short end and lower on the long bond as the yield curve continues to flatten. A flattening yield curve usually signifies that the market is expecting a slowdown in the economy. The 5 year Treasury closed yielding 3.91%. The 10 year’s yield increased to 4.24%, while the 30 year bond fell to 4.57%.
Next week will continue to be a volatile week. Again a flood of earnings reports will be released, but traders will again be looking for signed of inflation and a slowdown in the economy. Oil will be a major factor with the price of crude directing the market. President Bush will be meeting with Prince Abdullah of Saudi Arabia next week to discuss increasing production to help stem the price oil and gasoline.
Companies releasing earnings reports next week are Chubb Corp (CB), Du Pont (DD), Eastman Chemical (EMN), ITT Industries (ITT), Newell Rubbermaid (NWL), Northrop Grumman (NOC), Proctor & Gamble (PG), Stanley Works (SWK), Synovus Financial (SNV), Aflac Inc (AFL), Anheuser-Bush (BUD), Bristol-Myers Squibb (BMY), ConocoPhillips (COP), Fuji Photo (FUJIY), Estée Lauder (EL), ParternRe (PRE), Rayonier Inc (RYN), Telefonos de Mexico (TMX), Wm Wrigley Jr. (WWY), Black& Decker (BDK), Bright Horizons Family (BFAM), Cognizant Tech (CTSH), Kronos Inc (KRON), and SEIC Investments (SEIC).
By Rick Paler
This week has been a rollercoaster ride for investors. As expected Wall Street continued to ignore positive earnings news and focus on economic reports that give indications on inflation and the economy. Mergers continued to be announced this week, giving some reason for the bulls to come out of hibernation.
One third of the S&P 500 companies have reported earnings for the first quarter. Earnings continue to come in very strong causing the street to up their estimates for the quarter. Just a few weeks ago analyst had expected the S&P 500 to post earnings growth of 7%. Now it stands at 8.6% and some analyst are expecting double digit growth year over year for the index. Strong earnings reports came from the likes of Coca-Cola, Johnson & Johnson, Pfizer, Amgen, Kinder Morgan Inc., and Sherwin-Williams. Each company beat the streets earnings estimates for the quarter.
Coca-Cola Co. (KO) beat analyst earnings estimates of $0.43 per share posting $0.47 per share excluding items, causing the stock price to jump 3.5% on the news. Revenues at the beverage company also rose 4% to $5.27 billion. Worldwide case volume increased 3% but North American sale remain soft.
Johnson & Johnson (JNJ) posted first quarter earnings of $0.97 beating the streets estimate of only $0.92 per share. Sales at the company grew a strong 11% to $12.8 billion. Additionally, the company upped their full year 2005 guidance.
Pharmaceutical giant Pfizer (PFE) reported first quarter earnings of $0.54 per share a penny ahead of Wall Streets estimates. Revenues at the company grew by 5% to $13.09 billion. Giving guidance for the full year, the company reduced its outlook to $1.04 from $1.16. The suspension of the company’s anti-arthritis drug Bextra and questions about Celebrex continue to hurt the company.
Amgen Inc.’s (AMGN) earnings came in higher then expected for the first quarter. Earnings came in at $0.72 per share and revenues grew to $2.83 billion or 21%. Revenue estimates for the company had been $2.88 billion. 2005 earnings guidance for the company is $2.80 to $2.90 per share.
Kinder Morgan Inc. (KMI) announced this week that they would increase their dividend to $0.76 per share or 8%. Additionally the company increased their share buyback program to $800 million from $750 million. Earnings for the first quarter were $1.16 per share, while revenues came in at $336.9 million. Analysts were looking for earnings of $1.15 per share.
Paint manufacture Sherwin-Williams Co. (SHW) continues to ride the housing wave. Net income at the company increased 62% for the quarter. The company earned $0.58 per share, besting estimates of only $0.55 per share. Sale increased to $1.54 billion or 17%.
Mergers news continues to excite investors as the New York Stock Exchange announced that they would acquire Archipelago Holdings (AX). The nation’s oldest exchange would become a publicly traded company if the deal goes through. By acquiring Archipelago the NYSE would move into electronic trading and possibly offer longer trading hours.
Adobe Systems Inc. (ADBE) announced a deal to purchase Macromedia Inc. (MACR) in an all stock deal estimated at $3.4 billion. Shareholders of Macromedia will receive 0.69 shares of Adobe.
The oracle of Wall Street Warren Buffett‘s company Berkshire Hathaway Inc. (BRKA) (BRKB) and Anheuser-Bush Cos. (BUD) this week announced that Berkshire Hathaway had taken a large position in the company. Neither company released any details, but said that Berkshire Hathaway had become a “significant” shareholder. Shares of Anheuser-Bush shot up 5.3% on the news.
Traders concerned about inflation and the economy had some very important reports to digest this week. The PPI, CPI and Federal Reserves Beige Book were all released. Starting the week off was a better than expected PPI report. The core rate of the Producers Price Index, an index which measures inflation at the wholesale level came in at 0.1% versus economist estimates of 0.2%. This gave the market a reason to rally since it appeared that inflation was under control. This was followed up by the CPI, which measures inflation at the consumer level. The CPI core rate showed the largest increase since October of last year. The March Consumer Price Index was up 0.6%, economist were looking for 0.5% and the core rate increased 0.4% versus estimated of only 0.2%. The Federal Reserves Beige Book, a report that gives insight into the economy had two bad comments that traders focused on. The report said that “upward price pressures have strengthened” and that “high energy prices were already, or could soon be, damping consumer demand”. Both the poor CPI and Fed Beige Book caused the market to give up the gains it had received from the good PPI report.
Bond rates for the week were higher on the short end and lower on the long bond as the yield curve continues to flatten. A flattening yield curve usually signifies that the market is expecting a slowdown in the economy. The 5 year Treasury closed yielding 3.91%. The 10 year’s yield increased to 4.24%, while the 30 year bond fell to 4.57%.
Next week will continue to be a volatile week. Again a flood of earnings reports will be released, but traders will again be looking for signed of inflation and a slowdown in the economy. Oil will be a major factor with the price of crude directing the market. President Bush will be meeting with Prince Abdullah of Saudi Arabia next week to discuss increasing production to help stem the price oil and gasoline.
Companies releasing earnings reports next week are Chubb Corp (CB), Du Pont (DD), Eastman Chemical (EMN), ITT Industries (ITT), Newell Rubbermaid (NWL), Northrop Grumman (NOC), Proctor & Gamble (PG), Stanley Works (SWK), Synovus Financial (SNV), Aflac Inc (AFL), Anheuser-Bush (BUD), Bristol-Myers Squibb (BMY), ConocoPhillips (COP), Fuji Photo (FUJIY), Estée Lauder (EL), ParternRe (PRE), Rayonier Inc (RYN), Telefonos de Mexico (TMX), Wm Wrigley Jr. (WWY), Black& Decker (BDK), Bright Horizons Family (BFAM), Cognizant Tech (CTSH), Kronos Inc (KRON), and SEIC Investments (SEIC).
Friday, April 15, 2005
Weekly Market Report 04-15-2005
Stocks get whacked
By Rick Paler
Thank goodness this week is over, since it was a bloody one for traders. Stocks were pummeled across the board as the market bears firmly took hold of market sentiment. An earnings report from IBM and a warning from Ford did not help. Economic reports and the FOMC minutes from the March 22 meeting added to the bear’s arsenal.
The Dow was off over 373 points by weeks end and the NASDAQ was down 91 points for the week. Stocks were off across all sectors this week. The week started off with Ford Motor Co. (F) cutting their full year guidance citing energy prices, steel prices and health care cost. The company now expects earnings of $1.25 to $1.50. Their prior guidance had been $1.75 to $1.95. Not helping was Standard & Poor’s when they cut the rating on their corporate debt to negative from stable. The debt rating was maintained at the BBB- level for now, but that might change in the future if things do not turn around for the company. Both Ford and General Motors are being killed by the escalating cost of union employee benefits and a lack of inspirational vehicles.
International Business Machines (IBM) caused a large sell off in the technology sector. The company reported that their first quarter earnings fell short of the street estimate by a wide margin. Earnings came in at $0.85 per share versus the streets expectation of $0.90 per share. Revenues also fell short by close to a billion dollars. Revenues came in at $22.9 billion.
Financial giant Citigroup (C) missed Wall Streets earnings estimates of $1.02 per share, reporting earnings of $0.99 per share. Revenues also missed coming in at $21.53 billion. Citigroup’s board of directors increased the company’s repurchase program by $15 billion. The total authorization to repurchase shares now stands at $16.3 billion.
General Electric (GE) had a positive report when they announced that they had earned $0.38 per share, beating analyst estimates by a penny. Revenues also grew to $39.4 billion up 19% from the prior year. Additionally, the company announced that it was upping their 2005 full year guidance to $1.78 to $1.84 per share.
United Health Group (UNH) upped full year 2005 guidance and beat earnings estimates. The health care provider earned $1.16 per share versus the streets estimate of only $1.13 per share. Full year guidance now stands at $4.85 to $4.90 per share. Wall Street 2005 estimate had been $4.82 per share.
PepsiCo (PEP) posted nice numbers for the first quarter. The diversified snack and beverage producer reported earnings of $.053 per share beating estimates by two cents. The company also upped their full year guidance by a penny to $2.56 per share.
BB&T Corp. (BBT) reported a 20% increase in their first quarter earnings. Citing “excellent credit quality, disciplined expense control and reasonably strong loan growth”, the company reported earnings of $415.8 million or $0.75 per share. Credit quality at the bank was the best in four years.
In general corporate news game maker Electronic Arts (ERTS) announced they had signed an exclusive agreement with Collegiate Licensing Co. to manufacture college football video games. The agreement covers all videogame systems and allows them to use the college teams and their stadiums. This comes right after the announcement of a similar deal with the NFL. Both deals lock out all competitors from producing the popular football video games.
In economic news, several closely watched economic indicators shook the markets confidence along with a worrisome interpretation of the release FOMC minutes. The trade deficit widened to a record level exceeding economist estimates by a wide margin. The deficit rose to $61.0 billion up from $58.5 billion. Exports barely increased coming in at $100.5 billion, while imports rose to $161.5 billion. The increase was not due to consumer demand, but was caused by higher oil prices.
Preliminary University of Michigan’s Consumer Confidence Survey for April fell to 88.7 from 92.6 in March. The expected number was a decrease to 91.5. Additionally, the New York Empire State manufacturing survey dropped to 3.1 from 20.2 in March. A reading above zero indicates growth, but the number suggests that economic growth in the region is slowing. The March industrial production report was not any better. The report indicated the production grew 0.3%, but the core manufacturing component indicated almost zero growth coming in at 0.1%.
On top of this the markets digested the release of the March FOMC minutes and did not like what they saw. The market focused on the statement that “the required amount of cumulative tightening may have increased.” The statement by some indicates that the Federal Reserve will raise the Fed Funds rate higher than they had expected.
These reports could indicate a perfect storm brewing in the economy. One in which consumer spending and manufacturing slows, while interest rates rise. Remember the stagflation of the 1970’s? A sharp slowdown in the economy with higher interest rates could also become the pin that pops the housing bubble. People have been flocking to adjustable rate mortgages to get the lower rates they provide. This has allowed many to qualify to purchase homes they would otherwise not be able to afford. If interest rates continue to rise and the economy slows these people will see the interest rate on the mortgages increasing their monthly payments y to a level they can not meet. This has the potential to become a disaster.
Several weeks ago Alan Greenspan while testifying before Congress said that it was a conundrum why yields on the long end of the yield curve had not moves higher, but in fact had come down. The market is always forward looking and the answer appears to be that bond traders feel that the economy is slowing causing the yield curve to flatten. The question now becomes are they right and will the yield curve continue to flatten until we have an inverted yield curve? An inverted yield curve is one in which short term rates yield more the long term rates. This week the 5 year Treasury note closed at 3.86%. The 10 year Treasury note yield fell to 4.23% and the 30 year bond yield fell to 4.59%.
Next week will be a big week for earnings, but traders might focus only on the economic reports due to be released. Both the April PPI and CPI are to be released giving an indication on inflation. The Fed’s Beige Book report, that reports national economic conditions is also due to be released. All of these reports have the ability to move the markets. Overall, I do feel that the economy is slowing and that the Federal Reserve might note raise rates at their next meeting. I also feel that overall this quarter’s earnings season will be a positive one. These conditions might lead to a buying opportunity in the future.
Companies that are releasing earnings next week that will be watched are Coca Cola (KO), Johnson & Johnson (JNJ), Pfizer (PFE), US Bancorp (USB), Amgen (AMGN), Autoliv (ALV), and Fortune Brands (FO).
By Rick Paler
Thank goodness this week is over, since it was a bloody one for traders. Stocks were pummeled across the board as the market bears firmly took hold of market sentiment. An earnings report from IBM and a warning from Ford did not help. Economic reports and the FOMC minutes from the March 22 meeting added to the bear’s arsenal.
The Dow was off over 373 points by weeks end and the NASDAQ was down 91 points for the week. Stocks were off across all sectors this week. The week started off with Ford Motor Co. (F) cutting their full year guidance citing energy prices, steel prices and health care cost. The company now expects earnings of $1.25 to $1.50. Their prior guidance had been $1.75 to $1.95. Not helping was Standard & Poor’s when they cut the rating on their corporate debt to negative from stable. The debt rating was maintained at the BBB- level for now, but that might change in the future if things do not turn around for the company. Both Ford and General Motors are being killed by the escalating cost of union employee benefits and a lack of inspirational vehicles.
International Business Machines (IBM) caused a large sell off in the technology sector. The company reported that their first quarter earnings fell short of the street estimate by a wide margin. Earnings came in at $0.85 per share versus the streets expectation of $0.90 per share. Revenues also fell short by close to a billion dollars. Revenues came in at $22.9 billion.
Financial giant Citigroup (C) missed Wall Streets earnings estimates of $1.02 per share, reporting earnings of $0.99 per share. Revenues also missed coming in at $21.53 billion. Citigroup’s board of directors increased the company’s repurchase program by $15 billion. The total authorization to repurchase shares now stands at $16.3 billion.
General Electric (GE) had a positive report when they announced that they had earned $0.38 per share, beating analyst estimates by a penny. Revenues also grew to $39.4 billion up 19% from the prior year. Additionally, the company announced that it was upping their 2005 full year guidance to $1.78 to $1.84 per share.
United Health Group (UNH) upped full year 2005 guidance and beat earnings estimates. The health care provider earned $1.16 per share versus the streets estimate of only $1.13 per share. Full year guidance now stands at $4.85 to $4.90 per share. Wall Street 2005 estimate had been $4.82 per share.
PepsiCo (PEP) posted nice numbers for the first quarter. The diversified snack and beverage producer reported earnings of $.053 per share beating estimates by two cents. The company also upped their full year guidance by a penny to $2.56 per share.
BB&T Corp. (BBT) reported a 20% increase in their first quarter earnings. Citing “excellent credit quality, disciplined expense control and reasonably strong loan growth”, the company reported earnings of $415.8 million or $0.75 per share. Credit quality at the bank was the best in four years.
In general corporate news game maker Electronic Arts (ERTS) announced they had signed an exclusive agreement with Collegiate Licensing Co. to manufacture college football video games. The agreement covers all videogame systems and allows them to use the college teams and their stadiums. This comes right after the announcement of a similar deal with the NFL. Both deals lock out all competitors from producing the popular football video games.
In economic news, several closely watched economic indicators shook the markets confidence along with a worrisome interpretation of the release FOMC minutes. The trade deficit widened to a record level exceeding economist estimates by a wide margin. The deficit rose to $61.0 billion up from $58.5 billion. Exports barely increased coming in at $100.5 billion, while imports rose to $161.5 billion. The increase was not due to consumer demand, but was caused by higher oil prices.
Preliminary University of Michigan’s Consumer Confidence Survey for April fell to 88.7 from 92.6 in March. The expected number was a decrease to 91.5. Additionally, the New York Empire State manufacturing survey dropped to 3.1 from 20.2 in March. A reading above zero indicates growth, but the number suggests that economic growth in the region is slowing. The March industrial production report was not any better. The report indicated the production grew 0.3%, but the core manufacturing component indicated almost zero growth coming in at 0.1%.
On top of this the markets digested the release of the March FOMC minutes and did not like what they saw. The market focused on the statement that “the required amount of cumulative tightening may have increased.” The statement by some indicates that the Federal Reserve will raise the Fed Funds rate higher than they had expected.
These reports could indicate a perfect storm brewing in the economy. One in which consumer spending and manufacturing slows, while interest rates rise. Remember the stagflation of the 1970’s? A sharp slowdown in the economy with higher interest rates could also become the pin that pops the housing bubble. People have been flocking to adjustable rate mortgages to get the lower rates they provide. This has allowed many to qualify to purchase homes they would otherwise not be able to afford. If interest rates continue to rise and the economy slows these people will see the interest rate on the mortgages increasing their monthly payments y to a level they can not meet. This has the potential to become a disaster.
Several weeks ago Alan Greenspan while testifying before Congress said that it was a conundrum why yields on the long end of the yield curve had not moves higher, but in fact had come down. The market is always forward looking and the answer appears to be that bond traders feel that the economy is slowing causing the yield curve to flatten. The question now becomes are they right and will the yield curve continue to flatten until we have an inverted yield curve? An inverted yield curve is one in which short term rates yield more the long term rates. This week the 5 year Treasury note closed at 3.86%. The 10 year Treasury note yield fell to 4.23% and the 30 year bond yield fell to 4.59%.
Next week will be a big week for earnings, but traders might focus only on the economic reports due to be released. Both the April PPI and CPI are to be released giving an indication on inflation. The Fed’s Beige Book report, that reports national economic conditions is also due to be released. All of these reports have the ability to move the markets. Overall, I do feel that the economy is slowing and that the Federal Reserve might note raise rates at their next meeting. I also feel that overall this quarter’s earnings season will be a positive one. These conditions might lead to a buying opportunity in the future.
Companies that are releasing earnings next week that will be watched are Coca Cola (KO), Johnson & Johnson (JNJ), Pfizer (PFE), US Bancorp (USB), Amgen (AMGN), Autoliv (ALV), and Fortune Brands (FO).
Friday, April 08, 2005
Weekly Market Report 04-08-2005
First quarter earnings season begins
By Rick Paler
This week officially kicked off the first quarter earnings season with Alcoa reporting on Wednesday. More M&A activity was announced as companies look to put record hordes of cash to use. There were no economic reports this week of great significance leaving traders once again focused on oil. Oil prices for the week close lower allowing the market to post a slight gain for the week.
The first quarter earnings season kicked off this week with Alcoa beating estimates. Overall Wall Street traders expect earnings once again to be strong, but well below last years torrid pace. Overall sediment is for the S&P 500 index to post year over year earnings growth of 8%. While 8% earnings growth is well below last years level, it is still very respectable and above historical growth levels. Overall, this should be a fairly positive earnings season given the low level of earnings warnings given by companies to date.
Alcoa (AA) started the earnings season by postings earnings excluding items a penny above Wall Street estimates. The aluminum company did feel the sting of higher prices for energy and restructuring cost but posted earnings of $0.40 per share and revenues of $6.3 billion. The company also said that it expects strong global demand going forward.
Research In Motion (RIMM) the manufacture of the popular BlackBerry wireless devices reported their fiscal fourth quarter earnings this week. The company topped analyst estimates of only $0.65 per share when they reported earnings excluding items of $0.71 per share. Revenues at the company rocketed 92% to $404.8 million. The shares traded down on the news, when the company also gave disappointing guidance going forward.
Accenture Ltd. (ACN) reported fiscal second quarter earnings of $0.35 per share up 59% and exceeding the streets estimates of $0.32 per share. Revenues grew 15% to $3.8 billion.
Companies rich with cash are continuing to look for the best ways to put the cash to use. For several months now we have seen companies do this. We had Microsoft’s special dividend, and the Oracle PeopleSoft merger to name a few. In coming months many more companies will increase their dividend payouts or pay special dividends this year. While others will look to repurchase their shares and others will look to buy out competitors through M&A activity. Allowing them to become more dominate players in the world wide economy. In each case, the company is looking to enhance shareholder returns.
This week Dell (DELL) announced that they will increase their share repurchase program to $2 billion, double their original numbers. M&A activity this week continues to be hot. Comcast (CMCSA) and Time Warner (TWX) announced a $17.6 billion dollar bid to buy Adelphia Communications (ADELQ). Earlier Cablevision (CVC) had offered $16.5 billion for the company. It was also reported this week that HSBC Holdings (HBC) may be considering a bid for Morgan Stanley (MWD) for $75 billion. Morgan Stanley also announced that they would be selling their Discover card unit for between $8 billion and $9 billion. ChevronTexaco (CVX) announced they would purchase Unocal (UCL) for $18 billion. The deal will boost Chevron’s oil reserves by 15%.
In economic news this week, oil prices hit a record high of $85 per barrel before closing the week at $53.32 per barrel. Alan Greenspan in a speech this week said that the “current price frenzy” in energy should moderate. But as we go into the summer driving months the street will start to focus more on gasoline supplies, since many analyst feel demand will out strip refineries production capabilities. The reason for all the focus on energy and gas prices is that higher energy prices will slow consumer discretionary spending thereby hurting corporate profits in coming months, slowing the economy and causing a spike in inflation.
The 5 year Treasury note closed this week yielding 4.13%. The 10 year note closed at 4.47% and the 30 year bond closed at 4.75%. Overall the yield curve continues to flatten as the Federal Reserve raises interest rates on the short end and trades anticipate a slowdown in economic growth. This has caused yields on the long end to rise, but not as much as one would have anticipated if the market did not foresee an economic slowdown in the future.
Next week it will be all about earnings. The number of earnings release will ramp up to full swing next week. Companies that are worth watching next week are Abbott Laboratories (ABT), Advance Micro Devices (ADM), BB&T Corp (BBT), United Health Group (UNH), Genentech (DNA), Apple Computer (AAPL) PepsiCo (PEP), General Electric (GE), Citigroup (C) and Genuine Parts (GPC).
By Rick Paler
This week officially kicked off the first quarter earnings season with Alcoa reporting on Wednesday. More M&A activity was announced as companies look to put record hordes of cash to use. There were no economic reports this week of great significance leaving traders once again focused on oil. Oil prices for the week close lower allowing the market to post a slight gain for the week.
The first quarter earnings season kicked off this week with Alcoa beating estimates. Overall Wall Street traders expect earnings once again to be strong, but well below last years torrid pace. Overall sediment is for the S&P 500 index to post year over year earnings growth of 8%. While 8% earnings growth is well below last years level, it is still very respectable and above historical growth levels. Overall, this should be a fairly positive earnings season given the low level of earnings warnings given by companies to date.
Alcoa (AA) started the earnings season by postings earnings excluding items a penny above Wall Street estimates. The aluminum company did feel the sting of higher prices for energy and restructuring cost but posted earnings of $0.40 per share and revenues of $6.3 billion. The company also said that it expects strong global demand going forward.
Research In Motion (RIMM) the manufacture of the popular BlackBerry wireless devices reported their fiscal fourth quarter earnings this week. The company topped analyst estimates of only $0.65 per share when they reported earnings excluding items of $0.71 per share. Revenues at the company rocketed 92% to $404.8 million. The shares traded down on the news, when the company also gave disappointing guidance going forward.
Accenture Ltd. (ACN) reported fiscal second quarter earnings of $0.35 per share up 59% and exceeding the streets estimates of $0.32 per share. Revenues grew 15% to $3.8 billion.
Companies rich with cash are continuing to look for the best ways to put the cash to use. For several months now we have seen companies do this. We had Microsoft’s special dividend, and the Oracle PeopleSoft merger to name a few. In coming months many more companies will increase their dividend payouts or pay special dividends this year. While others will look to repurchase their shares and others will look to buy out competitors through M&A activity. Allowing them to become more dominate players in the world wide economy. In each case, the company is looking to enhance shareholder returns.
This week Dell (DELL) announced that they will increase their share repurchase program to $2 billion, double their original numbers. M&A activity this week continues to be hot. Comcast (CMCSA) and Time Warner (TWX) announced a $17.6 billion dollar bid to buy Adelphia Communications (ADELQ). Earlier Cablevision (CVC) had offered $16.5 billion for the company. It was also reported this week that HSBC Holdings (HBC) may be considering a bid for Morgan Stanley (MWD) for $75 billion. Morgan Stanley also announced that they would be selling their Discover card unit for between $8 billion and $9 billion. ChevronTexaco (CVX) announced they would purchase Unocal (UCL) for $18 billion. The deal will boost Chevron’s oil reserves by 15%.
In economic news this week, oil prices hit a record high of $85 per barrel before closing the week at $53.32 per barrel. Alan Greenspan in a speech this week said that the “current price frenzy” in energy should moderate. But as we go into the summer driving months the street will start to focus more on gasoline supplies, since many analyst feel demand will out strip refineries production capabilities. The reason for all the focus on energy and gas prices is that higher energy prices will slow consumer discretionary spending thereby hurting corporate profits in coming months, slowing the economy and causing a spike in inflation.
The 5 year Treasury note closed this week yielding 4.13%. The 10 year note closed at 4.47% and the 30 year bond closed at 4.75%. Overall the yield curve continues to flatten as the Federal Reserve raises interest rates on the short end and trades anticipate a slowdown in economic growth. This has caused yields on the long end to rise, but not as much as one would have anticipated if the market did not foresee an economic slowdown in the future.
Next week it will be all about earnings. The number of earnings release will ramp up to full swing next week. Companies that are worth watching next week are Abbott Laboratories (ABT), Advance Micro Devices (ADM), BB&T Corp (BBT), United Health Group (UNH), Genentech (DNA), Apple Computer (AAPL) PepsiCo (PEP), General Electric (GE), Citigroup (C) and Genuine Parts (GPC).
Friday, March 25, 2005
Weekly Market Report 03-25-2005
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).
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).
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).
Friday, February 25, 2005
S&P 500 and Dow Jones Index erase loses
S&P 500 and Dow Jones Index erase loses
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
Weekly Market Report 02-25-2005
S&P 500 and Dow Jones Index erase loses
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
Weekly Market Report 02-25-2005
S&P 500 and Dow Jones Index erase loses
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
By Rick Paler
Wall Street traders returned from Monday’s holiday and renewed their fears of inflation after last Friday’s higher than expected PPI numbers. Tuesday saw oil prices shoot upwards and the dollar continued with its free fall causing fear. Overall the market later in the week overlooked inflation fears as positive economic data was released, oil prices fell and Japanese leaders said that they would continue buying U.S. government bonds Japan also said that it would not sell off their dollar bases investments. Earnings reports for the week were again generally positive with Hormel Foods and H&R Block beating estimates, while Home Depot and Staples met expectations.
The stock market continued with its broad based rally this week after a bad start to erase this year’s loses. The NASDAQ, while also improving this week continues to struggle as investors shy away from higher PE stocks and look for safer stock investments.
In general news Exxon Mobil (XON) surpassed General Electric (GE) as the largest capitalized company in the world. Higher oil prices have caused a run up in the company’s stock price.
Hormel Foods (HRL) reported that their fiscal first quarter earnings beat Wall Streets estimates by two cents. The maker of Spam, Stag Chili, Dinty Moore and Jenny-O said their net income for the quarter surged 24%. The company posted earnings of $0.46 per share or $64.5 million. Net sales at the company climbed to $1.27 billion up 12%. The company also raised guidance for their fiscal second quarter to $0.38 to $0.44 per share and boosted there full year guidance to $1.70 to $1.80 per share.
H&R Block (HRB) announced that their fiscal third quarter net income fell 14% to $0.55 per share. The company cited lower margins in their mortgage division. The company did however beat Wall Streets estimated by a nickel. The company also said they expect a good tax season.
Home Depot (HD) announced that former Secretary of the Department of Homeland Security, Tom Ridge will join the company’s board of directors. The company also said that they would increase their dividend by nearly 18% to $0.10 per share and repurchase an additional $2 billion of the company’s stock. Fourth quarter earnings at the company rose 11.9% to $1.09 billion or $0.47 per share matching analyst estimates. The company also reaffirmed their prior guidance for 2005 saying they expected earnings growth of 10% to 15% for the year.
Staples (SPLS) matched analyst estimates by posting earnings of $0.50 per share a 19% increase over last years results. Sales at the company rose 13%. Giving guidance the retailer said it expects to earn $0.29 to $0.30 per share for the first quarter.
Genuine Parts Company (GPC) reported record earnings and sales for 2004. Earnings at the company were up 11% from the prior year to $2.25 per share. Sales were up 8% to $9.1 billion. For the fourth quarter 2004 earnings came in at $0.55 per share up 10% year over year. While sales rose 8% to $2.25 billion.
Patterson Companies Inc. (PDCO) saw their fiscal third quarter earnings rise 25% to $0.36 per share or $50.1 million meeting the streets estimates. The dental, veterinary and rehabilitation supply company said it expects fourth quarter earning between $0.38 and $0.40 per share.
Additionally Quest Communications (Q) submitted another offer to purchase MCI (MCIP) that nearly matched Verizon Communication’s (VZ) offer. Federated Department Stores board of directors and May Department Stores (MAY) board will be meeting this weekend to discuss their possible merger.
Economic news this week was highlighted by the release of the fourth quarter GDP numbers. The Commerce Department said that the preliminary fourth quarter GDP rose more than economist had expected rising 3.8%. Economist had expected growth of only 3.7%. Economist attributed the rise to strong trade and business investment. Economists are now expecting the economy to continue with its strong growth between 3.5% and 4% for the first half of 2005. This is well ahead of historical norms and bodes well for the stock market.
After the poor PPI numbers released last Friday, that worried traders that inflation was picking up, the CPI numbers indicated that was not the case. The Consumer Price Index which measures inflation at the retail level came in at 0.1% and the core rate which excludes food and energy came in at 0.2%. Both numbers were in line with estimates.
In bonds yields rose across the entire yield curve this week as oil prices and the weaker dollar made traders think higher interest rates were down the road. The 5 year Treasury notes yield rose to 3.89%. The 5 year note increased to 4.26% and the 30 year bond ended that week higher at 4.63%.
Next week the market will continue to be swayed by oil prices and the dollar. Even as Wall Street becomes comfortable with the idea of oil prices of between $50.00 and $55.00 per barrel. Earnings releases will be lighter next week with H.J. Heinz Company (HNZ), Tiffany & Co. (TIF), Iron Mountain Inc. (IRM), Costco (COST) and Berkshire Hathaway (BRK.A / BRK.B) reporting.
Saturday, February 19, 2005
Weekly Market Report 02-18-2005
Greenspan says economy expanding
By Rick Paler
Stock and bond traders were focused this week on Federal Reserve Chairman Alan Greenspan’s testimony before the Senate Banking Committee, which occurred on Wednesday. Traders were looking for hints about were interest rates will head, inflation and the general health of the economy. Earnings releases this week continued to come in strong, with Coca-Cola, Wal-Mart, and Target all posting better than expected earnings. The much anticipated FDA advisory panel reviewed the safety of Cox-2 inhibitors. Economic data released this week was mixed. While bond rates moved higher.
During Fed Chairman Alan Greenspan’s testimony he said “All told, the economy seems to have entered 2005 expanding at a reasonably good pace, with inflation expectations well anchored.” He also commented on long term bond yields. Although the Fed Funds rate has risen 1.5% in the last year, long term bond yields have fallen. Typically long term bond rates should have also moved higher. He citied three possible reasons for the decline in long term rates, expectations that inflation will not be a problem, a surplus in foreign capital come into the bond market and mortgage investors investing into long term bonds. In his remarks he called it a “conundrum” and “aberration”.
In Earnings news Coca-Cola (KO) posted better than expected results. The company reported a 30% gain in their fourth quarter net income or $0.50 per share as revenues grew to $5.26 billion. Excluding charges the company earned $0.46 per share beating analyst estimates of only $0.40 per share.
Closely watch bellwether Wal-Mart Stores (WMT) beat earnings estimated by a penny. The world’s largest retailer announced that their fourth quarter profits rose to $3.16 billion or $0.75 per share. Revenues at the company increased to $82.2 billion. Giving guidance for the first quarter the company said it expects to earn $0.56 to $0.58 per share.
Target (TGT) also beat Wall Streets estimates by a penny. The retailer reported earnings of $0.90 per share as same-store sales increased 5.4%.Giving guidance, the company said it sees 2005 earnings growth of 20% and said that it was comfortable with the streets estimates of $2.55 per share.
Medical device company, Advanced Neuromodulation Systems Inc. (ANSI) reported that fourth quarter earnings increased 38% to $0.24 per share. Analyst had estimated that the company would only earn $0.25 per share. Revenues at the company surged 26% to $32.3 million. The company also announced a share repurchase program that would allow the company to buy up to one million shares.
HCC Insurance Holdings Inc. (HCC) reported that their earnings more than doubled in the fourth quarter. The company posted net earnings of $0.84 per share. For all off 2004 the company’s earnings grew by 45% coming in at $2.47 per share. Chairman and CEO Stephen Way said “2004 was the best year in our history and we are confident of improving on this in 2005.” oldi
Pharmaceutical giants Pfizer (PFE) and Merck (MRK) both received good news this week when a FDA panel recommended that Pfizer’s Cox-2 inhibitor Celebrex and Bextra could stay on the market and Merck who had pulled their Cox-2 inhibitor Vioxx painkiller from the market could be allowed to return. Both companies would have to disclose warnings that the drugs may increase the risk of heart attacks and strokes. Pfizer shares closed up 6.9% on the news, while Merck shares closed up 13%. The ruling might protect the companies from possible future litigation.
In economic news, the Empire Manufacturing Index missed expectations but still indicated that manufacturing in New York continues to grow. Unexpectedly the PPI jumped well above economist estimates leading to fears of inflation. The core rate for January which excludes food and energy jumped up 0.8%, economist had expected a rise of only 0.2%.
Bond rate rose across all maturities after Mr. Greenspan’s comments about long bond yields. The 5 year Treasury note closed yielding 3.85%, while the 10 year and 30 year yields increased to 4.26% and 4.65% respectively.
Traders will continue with their cautious stance next week as they try to figure out the mystery of the long term bond yields. Traders are concerned that the yields are indicating something the market is not seeing right now. Next week companies releasing earnings that are of interest are; Genuine Parts (GPC), Home Depot (HD), Hormel Foods (HRL), The TJX Companies (TJX), Toll Brothers (TOL), Gap Inc. (GPS), and Patterson Dental (PDCO).
By Rick Paler
Stock and bond traders were focused this week on Federal Reserve Chairman Alan Greenspan’s testimony before the Senate Banking Committee, which occurred on Wednesday. Traders were looking for hints about were interest rates will head, inflation and the general health of the economy. Earnings releases this week continued to come in strong, with Coca-Cola, Wal-Mart, and Target all posting better than expected earnings. The much anticipated FDA advisory panel reviewed the safety of Cox-2 inhibitors. Economic data released this week was mixed. While bond rates moved higher.
During Fed Chairman Alan Greenspan’s testimony he said “All told, the economy seems to have entered 2005 expanding at a reasonably good pace, with inflation expectations well anchored.” He also commented on long term bond yields. Although the Fed Funds rate has risen 1.5% in the last year, long term bond yields have fallen. Typically long term bond rates should have also moved higher. He citied three possible reasons for the decline in long term rates, expectations that inflation will not be a problem, a surplus in foreign capital come into the bond market and mortgage investors investing into long term bonds. In his remarks he called it a “conundrum” and “aberration”.
In Earnings news Coca-Cola (KO) posted better than expected results. The company reported a 30% gain in their fourth quarter net income or $0.50 per share as revenues grew to $5.26 billion. Excluding charges the company earned $0.46 per share beating analyst estimates of only $0.40 per share.
Closely watch bellwether Wal-Mart Stores (WMT) beat earnings estimated by a penny. The world’s largest retailer announced that their fourth quarter profits rose to $3.16 billion or $0.75 per share. Revenues at the company increased to $82.2 billion. Giving guidance for the first quarter the company said it expects to earn $0.56 to $0.58 per share.
Target (TGT) also beat Wall Streets estimates by a penny. The retailer reported earnings of $0.90 per share as same-store sales increased 5.4%.Giving guidance, the company said it sees 2005 earnings growth of 20% and said that it was comfortable with the streets estimates of $2.55 per share.
Medical device company, Advanced Neuromodulation Systems Inc. (ANSI) reported that fourth quarter earnings increased 38% to $0.24 per share. Analyst had estimated that the company would only earn $0.25 per share. Revenues at the company surged 26% to $32.3 million. The company also announced a share repurchase program that would allow the company to buy up to one million shares.
HCC Insurance Holdings Inc. (HCC) reported that their earnings more than doubled in the fourth quarter. The company posted net earnings of $0.84 per share. For all off 2004 the company’s earnings grew by 45% coming in at $2.47 per share. Chairman and CEO Stephen Way said “2004 was the best year in our history and we are confident of improving on this in 2005.” oldi
Pharmaceutical giants Pfizer (PFE) and Merck (MRK) both received good news this week when a FDA panel recommended that Pfizer’s Cox-2 inhibitor Celebrex and Bextra could stay on the market and Merck who had pulled their Cox-2 inhibitor Vioxx painkiller from the market could be allowed to return. Both companies would have to disclose warnings that the drugs may increase the risk of heart attacks and strokes. Pfizer shares closed up 6.9% on the news, while Merck shares closed up 13%. The ruling might protect the companies from possible future litigation.
In economic news, the Empire Manufacturing Index missed expectations but still indicated that manufacturing in New York continues to grow. Unexpectedly the PPI jumped well above economist estimates leading to fears of inflation. The core rate for January which excludes food and energy jumped up 0.8%, economist had expected a rise of only 0.2%.
Bond rate rose across all maturities after Mr. Greenspan’s comments about long bond yields. The 5 year Treasury note closed yielding 3.85%, while the 10 year and 30 year yields increased to 4.26% and 4.65% respectively.
Traders will continue with their cautious stance next week as they try to figure out the mystery of the long term bond yields. Traders are concerned that the yields are indicating something the market is not seeing right now. Next week companies releasing earnings that are of interest are; Genuine Parts (GPC), Home Depot (HD), Hormel Foods (HRL), The TJX Companies (TJX), Toll Brothers (TOL), Gap Inc. (GPS), and Patterson Dental (PDCO).
Friday, February 11, 2005
Weekly Market Report 02-11-2005
Dell and Cisco disappoint analyst
By Rick Paler
This week was a slower week for earnings releases. Only 46 companies that make up the S&P 500 index reported. The two big earnings reports of the week were Dell and Cisco, unfortunately both disappointed. Also in the Technology sector, Hewlett-Packard’s CEO unexpectedly resigned. There was little to report this week on economic news which left bond traders looking to next week for direction.
As the fourth quarter earnings season comes to a close it looks like the S&P 500 posted some great numbers, once again exceeding the streets estimates. Now Wall Street is digesting corporate guidance for the first quarter. Currently the street is projecting profit growth of 6.9% up from 6.6%. While this number is substantially lower than last years earnings numbers, 7% year over year earnings growth is respectable and inline with historical levels.
Technology bellwether Cisco Systems (CSCO) reported that their fiscal second quarter earnings came in at $0.22 per share matching the streets estimates. Sale rose 12% to $6.06 billion which was near the company’s lower end of guidance. The company also announced their guidance for next quarter and disappointed the market. Looking at the next quarter the company expects that their fiscal third quarter revenue would be flat to up only 2%.
Dell (DELL) reported that their fiscal fourth quarter earnings came in at $0.37 per share beating expectations by a penny as revenues grew to $13.46 billion up 17%. The company also announced that their U.S. market share of PC’s had grown to 33%. Looking forward the company disappointed the market when they released their fiscal first quarter guidance. The company expects their first quarter revenues to come in at $13.4 billion and earnings of $0.37 per share. The street had expected revenues of $13.5 billion and earnings of $0.36 per share.
Cognizant Technology Solutions (CTSH) announced that their fourth quarter profits rocketed up 73%. The company earned $30.6 million or $0.21 per share, up from only $17.7 million or $0.13 per share for the same period a year ago. Revenues at the company also surged up 60% to $172.8 million. The IT service company also released first quarter guidance that was inline with analyst estimates. Full year guidance was ahead of current estimates. The company expects to earn $0.96 per share, on revenues of $845 million. Shares rose sharply on the news.
Clorox (CLX) reported fiscal second quarter earnings of $0.59 per share beating Wall Streets estimates of $0.52 per share. Sales at the company rose 8.7% to $1.0 billion. Guidance released by the company for their fiscal third quarter was inline with analyst estimates. The company expects earnings between $0.62 and $0.68 per share.
Hewlett-Packard’s (HPQ) CEO Carly Fiorina unexpectedly resigned after being forced out by the company’s board of directors. The company’s shares rose initially on the news. The company continues to lose market share to competitors even after the much publicized purchase of Compaq. The board of director will begin looking for a new CEO immediately to replace her.
Pfizer (PFE) announced that the company would implement a reorganization plan that would save the company $2 billion. The plan would change the way the company markets drugs to physicians and would not include layoffs, but would lower the company’s employee head count through normal attrition.
Black & Decker Corp. (BDK) will increase their dividend 33% to $0.28 per share from the prior $0.21 per share. The company also announced that they would repurchase an additional 2.5 million shares of the company’s stock.
In economic news there were two reports released this week that were of interest. Initial jobless claims fell unexpectedly to 303,000 versus economist estimates of 325,000. This was the lowest level in for years. The four week moving average also fell to a four year low of 315,500. This was interrupted by the market that the job market is continuing to improve.
The trade deficit for December fell to $56.4 billion from the prior months $59.3 billion. Economist had expected the deficit to come in at $57.0 billion. For the full 2004 year the trade deficit increased 24.4% to a record $617.7 billion as demand and higher prices for oil pushed the deficit higher.
The 5 year Treasury note closed the week yielding 3.68%. The 10 year note closed at 4.08% and the 30 year Treasury bond closed yielding 4.47%.
Next week there will be more economic news released. Traders will be digesting the release of retail sale, industrial production, housing starts and the PPI. The market will also watch Federal Reserve Chairman Alan Greenspan as he testifies before the Senate Banking Committee. Next week the following companies will be releasing earnings; Deere & Company (DE), HCC Insurance Holdings (HCC), Nordstrom (JWN), Hewlett-Packard (HPQ), Intuit (INTU), Target Corp (TGT), and Wal-Mart (WMT).
By Rick Paler
This week was a slower week for earnings releases. Only 46 companies that make up the S&P 500 index reported. The two big earnings reports of the week were Dell and Cisco, unfortunately both disappointed. Also in the Technology sector, Hewlett-Packard’s CEO unexpectedly resigned. There was little to report this week on economic news which left bond traders looking to next week for direction.
As the fourth quarter earnings season comes to a close it looks like the S&P 500 posted some great numbers, once again exceeding the streets estimates. Now Wall Street is digesting corporate guidance for the first quarter. Currently the street is projecting profit growth of 6.9% up from 6.6%. While this number is substantially lower than last years earnings numbers, 7% year over year earnings growth is respectable and inline with historical levels.
Technology bellwether Cisco Systems (CSCO) reported that their fiscal second quarter earnings came in at $0.22 per share matching the streets estimates. Sale rose 12% to $6.06 billion which was near the company’s lower end of guidance. The company also announced their guidance for next quarter and disappointed the market. Looking at the next quarter the company expects that their fiscal third quarter revenue would be flat to up only 2%.
Dell (DELL) reported that their fiscal fourth quarter earnings came in at $0.37 per share beating expectations by a penny as revenues grew to $13.46 billion up 17%. The company also announced that their U.S. market share of PC’s had grown to 33%. Looking forward the company disappointed the market when they released their fiscal first quarter guidance. The company expects their first quarter revenues to come in at $13.4 billion and earnings of $0.37 per share. The street had expected revenues of $13.5 billion and earnings of $0.36 per share.
Cognizant Technology Solutions (CTSH) announced that their fourth quarter profits rocketed up 73%. The company earned $30.6 million or $0.21 per share, up from only $17.7 million or $0.13 per share for the same period a year ago. Revenues at the company also surged up 60% to $172.8 million. The IT service company also released first quarter guidance that was inline with analyst estimates. Full year guidance was ahead of current estimates. The company expects to earn $0.96 per share, on revenues of $845 million. Shares rose sharply on the news.
Clorox (CLX) reported fiscal second quarter earnings of $0.59 per share beating Wall Streets estimates of $0.52 per share. Sales at the company rose 8.7% to $1.0 billion. Guidance released by the company for their fiscal third quarter was inline with analyst estimates. The company expects earnings between $0.62 and $0.68 per share.
Hewlett-Packard’s (HPQ) CEO Carly Fiorina unexpectedly resigned after being forced out by the company’s board of directors. The company’s shares rose initially on the news. The company continues to lose market share to competitors even after the much publicized purchase of Compaq. The board of director will begin looking for a new CEO immediately to replace her.
Pfizer (PFE) announced that the company would implement a reorganization plan that would save the company $2 billion. The plan would change the way the company markets drugs to physicians and would not include layoffs, but would lower the company’s employee head count through normal attrition.
Black & Decker Corp. (BDK) will increase their dividend 33% to $0.28 per share from the prior $0.21 per share. The company also announced that they would repurchase an additional 2.5 million shares of the company’s stock.
In economic news there were two reports released this week that were of interest. Initial jobless claims fell unexpectedly to 303,000 versus economist estimates of 325,000. This was the lowest level in for years. The four week moving average also fell to a four year low of 315,500. This was interrupted by the market that the job market is continuing to improve.
The trade deficit for December fell to $56.4 billion from the prior months $59.3 billion. Economist had expected the deficit to come in at $57.0 billion. For the full 2004 year the trade deficit increased 24.4% to a record $617.7 billion as demand and higher prices for oil pushed the deficit higher.
The 5 year Treasury note closed the week yielding 3.68%. The 10 year note closed at 4.08% and the 30 year Treasury bond closed yielding 4.47%.
Next week there will be more economic news released. Traders will be digesting the release of retail sale, industrial production, housing starts and the PPI. The market will also watch Federal Reserve Chairman Alan Greenspan as he testifies before the Senate Banking Committee. Next week the following companies will be releasing earnings; Deere & Company (DE), HCC Insurance Holdings (HCC), Nordstrom (JWN), Hewlett-Packard (HPQ), Intuit (INTU), Target Corp (TGT), and Wal-Mart (WMT).
Friday, February 04, 2005
Weekly Market Report 02-04-2005
Safe Iraqi elections allows market to rise
By Rick Paler
Sunday’s historic elections in Iraq went off without the terrorism that some expected. Turnout for the election was very high as voters risked being killed to participate in democracy. Initial figures indicate that close to 60% of the nations citizens voted. This was the same percentage of U.S citizens that voted in our last election and we did not have to worry about being killed when we voted. The smooth election removed traders concerns about heavy casualties occurring during the election and allowed the market bulls to push the market higher for the week.
The election alone was not the only factor affecting the markets this week. Additionally we saw a decline in oil prices and OPEC announced that they would leave production at current levels. We continue to see great corporate earnings combined with good economic reports. Ads to this, an increase in merger and acquisition activity and you have a recipe for a higher market.
Earnings continued to come in and this week we saw 93 of the 500 companies that make up the S&P 500 report. To date operating earnings are on target to show 18% growth for the fourth quarter exceeding the streets prior estimates of only 15% - 16%. So what is preventing the market from taking off like a rocket? It is my feeling that corporate guidance for 2005 indicates that the S&P 500 will have earnings growth of around 7%. This is not a bad number and puts growth closer to historical norms. Also expectations are that the Federal Reserve will continue with their policy of rising interest rates. These two factors combined with the continued threat of a terrorist attack are the causes for the cautious sentiment in the market.
M&A activity continued this week with the announcement that SBC Communications (SBC) has agreed to purchase AT&T (T) for $16 billion. Share holders of AT&T will receive 0.77942 shares of SBC common stock or about $18.41 per share and a $1.30 cash dividend.
Quest Communications (Q) has thrown its hat into the ring, when it was reported that the company was making an offer to purchase MCI (MCIP) for $6.3 billion. Verizon Communications (VZ) has been reported to also be in talks to purchase the company.
MetLife (MET) announced that they would acquire Citigroup’s (C) insurance group Travelers Life & Annuity Co. and all of their international insurance business for $11.5 billion.
As a point to note, in January alone $120 billion dollars worth of M&A deal have been announce along with over $30 billion worth of stock repurchase programs. This is a positive for the market and should continue for some time, since corporations are sitting on record amounts of cash. I would also expect more companies to raise their dividends this year to pay out some of this cash.
In corporate earnings news this week Northrop Grumman (NOC), PepsiCo (PEP), Disney (DIS), Google (GOOG), Chubb Corp (CB), Sherwin Williams (SHW) and AFLAC (AFL) all exceeded analyst earnings estimates.
Google (GOOG) surprised the street when they announced an eightfold increase in their fourth quarter net income. The company’s fourth quarter net rose to $204 million or $0.71 per share. Excluding items the company reported earnings of $0.90 per share well ahead of Wall Streets estimates of only $0.77 per share.
Chubb Corp (CB) report that their net income increased six times to $467.6 million or $2.39 per share ahead of analyst estimates. The company also reported that their full year 2004 net income increased 91% over the prior year to $1.55 billion or $8.01 per share. The insurance company also gave 2005 operating income guidance of $7.60 - $8.00 per share.
Paint manufacture Sherwin-Williams (SHW) reported earnings of $82.5 million or $0.57 per share, which is a $16.5% increase over the same period last year. The company earned $393.3 million or $2.72 per share for the full 2004 year. Both results beat Wall Street estimates by a penny.
In other news ConocoPhillips (COP) announced plans to repurchase up to $1 billion of the company’s stock over the next two years. The company’s repurchase plan is to offset dilution from the company’s stock based employee compensation plan.
Adobe Systems Inc. (ADBE) raised their first quarter revenue guidance to $450 million to $470 million from a prior $435 million to $455 million. The company also increased their earnings outlook to $0.47 to $0.51 per share from $0.45 to $0.48 per share. The company cited strong demand for their products including their newly release Acrobat 7.0.
In economic news it was no surprise when it was announced that the Federal Reserve raised interest rates for the sixth time. The increase of 25 basis points puts the Federal Funds rate at 2.50%. The closely watch policy statement remained unchanged indicating that the Federal Reserve would continue with its measured policy of interest rate increases. Indications are that a natural Fed policy would bring rates up to the 3.25% range.
Bond traders pushed rates lower along the yield curve this week. The 5 year Treasury closed yielding 3.66%. The 5 year note ending yielding 4.07% and the 30 year Treasury bond closed at 4.48%.
Next week companies to watch are Bp PLC (BP), Cisco Systems (CSCO), MetLife (MET), Cognizant Technology (CTSH), Dell (DELL), and Unilever (UN).
By Rick Paler
Sunday’s historic elections in Iraq went off without the terrorism that some expected. Turnout for the election was very high as voters risked being killed to participate in democracy. Initial figures indicate that close to 60% of the nations citizens voted. This was the same percentage of U.S citizens that voted in our last election and we did not have to worry about being killed when we voted. The smooth election removed traders concerns about heavy casualties occurring during the election and allowed the market bulls to push the market higher for the week.
The election alone was not the only factor affecting the markets this week. Additionally we saw a decline in oil prices and OPEC announced that they would leave production at current levels. We continue to see great corporate earnings combined with good economic reports. Ads to this, an increase in merger and acquisition activity and you have a recipe for a higher market.
Earnings continued to come in and this week we saw 93 of the 500 companies that make up the S&P 500 report. To date operating earnings are on target to show 18% growth for the fourth quarter exceeding the streets prior estimates of only 15% - 16%. So what is preventing the market from taking off like a rocket? It is my feeling that corporate guidance for 2005 indicates that the S&P 500 will have earnings growth of around 7%. This is not a bad number and puts growth closer to historical norms. Also expectations are that the Federal Reserve will continue with their policy of rising interest rates. These two factors combined with the continued threat of a terrorist attack are the causes for the cautious sentiment in the market.
M&A activity continued this week with the announcement that SBC Communications (SBC) has agreed to purchase AT&T (T) for $16 billion. Share holders of AT&T will receive 0.77942 shares of SBC common stock or about $18.41 per share and a $1.30 cash dividend.
Quest Communications (Q) has thrown its hat into the ring, when it was reported that the company was making an offer to purchase MCI (MCIP) for $6.3 billion. Verizon Communications (VZ) has been reported to also be in talks to purchase the company.
MetLife (MET) announced that they would acquire Citigroup’s (C) insurance group Travelers Life & Annuity Co. and all of their international insurance business for $11.5 billion.
As a point to note, in January alone $120 billion dollars worth of M&A deal have been announce along with over $30 billion worth of stock repurchase programs. This is a positive for the market and should continue for some time, since corporations are sitting on record amounts of cash. I would also expect more companies to raise their dividends this year to pay out some of this cash.
In corporate earnings news this week Northrop Grumman (NOC), PepsiCo (PEP), Disney (DIS), Google (GOOG), Chubb Corp (CB), Sherwin Williams (SHW) and AFLAC (AFL) all exceeded analyst earnings estimates.
Google (GOOG) surprised the street when they announced an eightfold increase in their fourth quarter net income. The company’s fourth quarter net rose to $204 million or $0.71 per share. Excluding items the company reported earnings of $0.90 per share well ahead of Wall Streets estimates of only $0.77 per share.
Chubb Corp (CB) report that their net income increased six times to $467.6 million or $2.39 per share ahead of analyst estimates. The company also reported that their full year 2004 net income increased 91% over the prior year to $1.55 billion or $8.01 per share. The insurance company also gave 2005 operating income guidance of $7.60 - $8.00 per share.
Paint manufacture Sherwin-Williams (SHW) reported earnings of $82.5 million or $0.57 per share, which is a $16.5% increase over the same period last year. The company earned $393.3 million or $2.72 per share for the full 2004 year. Both results beat Wall Street estimates by a penny.
In other news ConocoPhillips (COP) announced plans to repurchase up to $1 billion of the company’s stock over the next two years. The company’s repurchase plan is to offset dilution from the company’s stock based employee compensation plan.
Adobe Systems Inc. (ADBE) raised their first quarter revenue guidance to $450 million to $470 million from a prior $435 million to $455 million. The company also increased their earnings outlook to $0.47 to $0.51 per share from $0.45 to $0.48 per share. The company cited strong demand for their products including their newly release Acrobat 7.0.
In economic news it was no surprise when it was announced that the Federal Reserve raised interest rates for the sixth time. The increase of 25 basis points puts the Federal Funds rate at 2.50%. The closely watch policy statement remained unchanged indicating that the Federal Reserve would continue with its measured policy of interest rate increases. Indications are that a natural Fed policy would bring rates up to the 3.25% range.
Bond traders pushed rates lower along the yield curve this week. The 5 year Treasury closed yielding 3.66%. The 5 year note ending yielding 4.07% and the 30 year Treasury bond closed at 4.48%.
Next week companies to watch are Bp PLC (BP), Cisco Systems (CSCO), MetLife (MET), Cognizant Technology (CTSH), Dell (DELL), and Unilever (UN).
Friday, January 28, 2005
Weekly Market Report 01-28-2005
Market post first gain of the year
By Rick Paler
The stock market posted its first weekly gain this year on positive earnings news. Overall sentiment remains cautious ahead of the Iraq elections taking place this Sunday. Merger activity continued this week with announcements from both Procter & Gamble and SBC Communications. Economic reports for the week were generally positive with no big surprises.
After watching the market slide downwards the first three weeks of 2005 the market managed to squeeze out a small gain this week. Positive earnings news was the main impetus for the gain. As I have mentioned in previous articles, I believe that fourth quarter earnings for the S&P 500 would come in at 16% earnings growth or better. Now that we are in the middle of the reporting season Wall Street analyst as a whole are estimating a 17% gain in earnings over last years same period. This is very impressive considering that earnings for the fourth quarter 2003 grew by 28.3%. This earnings growth continues to be fueled by productivity increases, the weaker dollar, and strong consumer spending. Although corporate earnings remain at record levels the sentiment remains cautious with many traders waiting for this weekend’s election in Iraq. Many fear major terrorist attacks and a disruption in Iraq’s oil production. This was evident when Microsoft posted excellent results and Procter & Gamble announce their merger plans with Gillette and the market as a whole barely moved upwards.
In corporate news as I anticipated merger mania continued this week with rumors that SBC Communications (SBC) was looking to merger with AT&T (T) and Procter & Gamble (PG) announce their plans to purchase Gillette (G). Again I will state that I expect this kind of merger activity to continue throughout this year. This is due to the fact that U.S corporations are sitting on record amounts of cash.
SBC Communications (SBC) is rumored to be in current talks with AT&T (T) to purchase the once dominate telecommunications company known as Ma Bell for an estimated $15 billion. The deal would have to pass antitrust regulatory review.
Procter & Gamble (PG) announce plans to acquire Gillette (G) for a massive $57 billion. The merger would create the world’s largest consumer product company exceeding the size of European rival Unileaver (UN). The company said that shareholders of Gillette would receive 0.975 shares of P&G for each share they hold. P&G also said that they would purchase $18 billion to $22 billion of its own stock over the next 12 months.
Microsoft (MSFT) earnings for their fiscal second quarter excluding items came in at $0.35 per share topping the streets estimates of only $0.33 per share. The company cited strong personal computer sales and the release of Halo 2 game for their Xbox gaming system. The company also raised their full-year revenue guidance to $39.8 billion to $40.0 billion.
Newell Rubbermaid Inc. (NWL) exceeded analyst earnings estimates by two cents when they announced earnings excluding items of 127 million or $0.46 per share. This compares favorably from last years loss of -$211.6 million or -$0.77 per share for the same period.
Estée Lauder Companies (EL) reported profits rose by 44.5% to $138.3 million or $0.60 per share exceeding Wall Streets estimates of $0.57 per share. The company said that the saw strong sales growth across all product lines.
Rayonier’s (RYN) fourth quarter income rose to $13.5 million or $0.26 per share and reported that their full-year 2004 net income came in at $3.08 per share compared to last years $1.16 per share. This was the company’s first year of operation as a REIT which gave the company a tax benefit of $49.7 million or $0.98 per share in the first quarter 2003.
In economic new, reports this week were mixed yet still indicated that the economy continues to grow. An unexpected raise in consumer confidence was reported by the Conference Board this week. Economist anticipated a reading of 101.0 for January yet the report indicated that consumer confidence rose to 103.4 indicating that consumer spending should remain strong.
The advanced Gross Domestic Product figures indicated that the economy continues to grow at a rate above the historical average, but the number missed economist estimates. The advanced GDP reported that the economy grew in fourth quarter 3.1%, economist had anticipated a reading of 3.5%.
Bond rates continue to rise on the short end of the yield curve as traders anticipate the FOMC to raise the Fed Funds rate again at their next meeting in February. The 5 year Treasury note closed yielding 3.68% this week, while the 10 year closed yielding 4.13% and the 30 year bond closed yielding 4.60%.
Next week could be another positive week for the market. If the elections in Iraq on Sunday proceed without major disruptions, it would remove some of the cautious sentiment in the market. This will allow traders to focus on the positive earnings the S&P 500 companies are posting. Companies that will release earnings next week that will be of interest are AFLAC (AFL), Exxon Mobile (XOM), Fuji Photo (FUJIY), Walt Disney Co. (DIS), Chubb Corp. (CB), Google (GOOG), Anheuser-Bush (BUD), Boeing (BA), and PepsiCo (PEP).
By Rick Paler
The stock market posted its first weekly gain this year on positive earnings news. Overall sentiment remains cautious ahead of the Iraq elections taking place this Sunday. Merger activity continued this week with announcements from both Procter & Gamble and SBC Communications. Economic reports for the week were generally positive with no big surprises.
After watching the market slide downwards the first three weeks of 2005 the market managed to squeeze out a small gain this week. Positive earnings news was the main impetus for the gain. As I have mentioned in previous articles, I believe that fourth quarter earnings for the S&P 500 would come in at 16% earnings growth or better. Now that we are in the middle of the reporting season Wall Street analyst as a whole are estimating a 17% gain in earnings over last years same period. This is very impressive considering that earnings for the fourth quarter 2003 grew by 28.3%. This earnings growth continues to be fueled by productivity increases, the weaker dollar, and strong consumer spending. Although corporate earnings remain at record levels the sentiment remains cautious with many traders waiting for this weekend’s election in Iraq. Many fear major terrorist attacks and a disruption in Iraq’s oil production. This was evident when Microsoft posted excellent results and Procter & Gamble announce their merger plans with Gillette and the market as a whole barely moved upwards.
In corporate news as I anticipated merger mania continued this week with rumors that SBC Communications (SBC) was looking to merger with AT&T (T) and Procter & Gamble (PG) announce their plans to purchase Gillette (G). Again I will state that I expect this kind of merger activity to continue throughout this year. This is due to the fact that U.S corporations are sitting on record amounts of cash.
SBC Communications (SBC) is rumored to be in current talks with AT&T (T) to purchase the once dominate telecommunications company known as Ma Bell for an estimated $15 billion. The deal would have to pass antitrust regulatory review.
Procter & Gamble (PG) announce plans to acquire Gillette (G) for a massive $57 billion. The merger would create the world’s largest consumer product company exceeding the size of European rival Unileaver (UN). The company said that shareholders of Gillette would receive 0.975 shares of P&G for each share they hold. P&G also said that they would purchase $18 billion to $22 billion of its own stock over the next 12 months.
Microsoft (MSFT) earnings for their fiscal second quarter excluding items came in at $0.35 per share topping the streets estimates of only $0.33 per share. The company cited strong personal computer sales and the release of Halo 2 game for their Xbox gaming system. The company also raised their full-year revenue guidance to $39.8 billion to $40.0 billion.
Newell Rubbermaid Inc. (NWL) exceeded analyst earnings estimates by two cents when they announced earnings excluding items of 127 million or $0.46 per share. This compares favorably from last years loss of -$211.6 million or -$0.77 per share for the same period.
Estée Lauder Companies (EL) reported profits rose by 44.5% to $138.3 million or $0.60 per share exceeding Wall Streets estimates of $0.57 per share. The company said that the saw strong sales growth across all product lines.
Rayonier’s (RYN) fourth quarter income rose to $13.5 million or $0.26 per share and reported that their full-year 2004 net income came in at $3.08 per share compared to last years $1.16 per share. This was the company’s first year of operation as a REIT which gave the company a tax benefit of $49.7 million or $0.98 per share in the first quarter 2003.
In economic new, reports this week were mixed yet still indicated that the economy continues to grow. An unexpected raise in consumer confidence was reported by the Conference Board this week. Economist anticipated a reading of 101.0 for January yet the report indicated that consumer confidence rose to 103.4 indicating that consumer spending should remain strong.
The advanced Gross Domestic Product figures indicated that the economy continues to grow at a rate above the historical average, but the number missed economist estimates. The advanced GDP reported that the economy grew in fourth quarter 3.1%, economist had anticipated a reading of 3.5%.
Bond rates continue to rise on the short end of the yield curve as traders anticipate the FOMC to raise the Fed Funds rate again at their next meeting in February. The 5 year Treasury note closed yielding 3.68% this week, while the 10 year closed yielding 4.13% and the 30 year bond closed yielding 4.60%.
Next week could be another positive week for the market. If the elections in Iraq on Sunday proceed without major disruptions, it would remove some of the cautious sentiment in the market. This will allow traders to focus on the positive earnings the S&P 500 companies are posting. Companies that will release earnings next week that will be of interest are AFLAC (AFL), Exxon Mobile (XOM), Fuji Photo (FUJIY), Walt Disney Co. (DIS), Chubb Corp. (CB), Google (GOOG), Anheuser-Bush (BUD), Boeing (BA), and PepsiCo (PEP).
Friday, January 21, 2005
Weekly Market Report 01-21-2005
Markets decline three weeks in a row
By Rick Paler
The recent decline in the market has many scratching their heads trying to analyze the cause. Nothing has fundamentally changed in the last three week. Any negative news should have already been priced into the market, such as the decline in the value of the dollar, the Federal Reserves continuation of their policy of raising interest rates, Iraq, terrorism, the rise in commodity cost and the slowing earnings growth estimated for 2005.
Overall the markets tend to be nervous at the beginning of each earnings season causing many traders to sit on the sidelines and take a wait and see attitude. This combined with last years late rally is causing some to book their profits ahead of earnings announcements. My expectation is that this downward trend has the potential to reverse itself as some to the market leaders post respectable earnings growth.
In earnings news Yahoo (YHOO) posted great numbers. The internet search company increased their earnings 62% in the fourth quarter posting earnings of $0.13 per share exceeding Wall Street estimates of only $0.11 per share.
Drug maker Pfizer (PFE) announced that their fourth quarter net income quadrupled to $0.38 per share. The company cited strong sales growth both in their cholesterol-fighting drug Lipitor and their arthritis drug Celebrex.
Bellwether giant General Electric (GE) beat Wall Street estimates by a penny reporting earnings of $0.51 per share as revenues came in at $43.7 billion jumping 18%. The company cited an excellent global economy for their results. For 2005 the company also said that it was confident that it could post earnings growth of 10% to 15%.
II-VI Inc. (IIVI) reported their fiscal second quarter results this week. Net earnings were $0.39 per share or $5.7 million dollars up from only $0.23 per share or $3.4 million dollars a year ago. The company said “record revenues and bookings for the second quarter attest to the continued strong worldwide demand for II-VI products.”
Fortune Brands (FO) net income rose 59% to $249.5 million or $1.68 per share. Wall Street estimates had been for the company to earn only $1.21 per share. The consumer brands company and maker of such brands as Moen, Titleist, and Jim Beam said that sales increased 15% to $1.91 billion for the period. The company also said that they expect earnings growth in the double-digits for both the first quarter and 2005.
Johnson & Johnson (JNJ) announced that they would take advantage of the American Jobs Creation Act of 2004 by repatriating $11 billion of overseas earnings back into the United States. The Act allows corporations to repatriate earnings from overseas at the reduced tax rate of 5.25% versus the maximum 35%. It is expected that over $300 billion in corporate profits will flow back into the United States before the tax break expires at the end of 2005.
Shares of online auction company eBay (EBAY) were hit hard this week when the company reported disappointing fourth quarter earnings and first quarter guidance. The company reported earnings of $0.33 per share, which was a penny below analyst estimates. First quarter guidance also missed their mark. The street was expecting earnings estimates of $0.37 per share and the company gave guidance of only $0.34 to $0.35 per share.
In economic news the New York Empire State index which measures manufacturing activity missed economist estimates but continued to show strong economic growth for the region. Real estate continues to surprise on the upside. Housing Starts jumped 11% to 2.0 million and building permits rose to 2.0 million, both exceeding estimates. The Consumer Price Index for December fell 0.1% indicating that inflation at the consumer level remains under control. Economist had expected the CPI to come in unchanged.
The current yield curve for bonds remains flat as interest rates on the short end of the yield curve are expected to rise throughout 2005. Bond rates were lower across the board this week. The 5 year Treasury note closed yielding 3.63% and the 10 year and 30 year closed yielding 4.14% and 4.64% respectively.
Next week traders will continue to focus on earnings. Company missing earnings will be greatly punished by the market and those meeting or exceeding estimates will for the most part be greeted with cautious enthusiasm. I am currently still expecting earnings for the S&P 500 to post growth of 16% then return to more normal levels of growth for the first quarter. Companies in the earnings spotlight next week are Rayonier Inc. (RYN), Johnson & Johnson (JNJ), Merck (MRK), DuPont (DD), Electronic Arts (ERTS), Black & Decker (BDK), Amgen (AMGN), Getty Images (GYI), Microsoft (MSFT), Estée Lauder (EL), and Procter & Gamble (PG),
By Rick Paler
The recent decline in the market has many scratching their heads trying to analyze the cause. Nothing has fundamentally changed in the last three week. Any negative news should have already been priced into the market, such as the decline in the value of the dollar, the Federal Reserves continuation of their policy of raising interest rates, Iraq, terrorism, the rise in commodity cost and the slowing earnings growth estimated for 2005.
Overall the markets tend to be nervous at the beginning of each earnings season causing many traders to sit on the sidelines and take a wait and see attitude. This combined with last years late rally is causing some to book their profits ahead of earnings announcements. My expectation is that this downward trend has the potential to reverse itself as some to the market leaders post respectable earnings growth.
In earnings news Yahoo (YHOO) posted great numbers. The internet search company increased their earnings 62% in the fourth quarter posting earnings of $0.13 per share exceeding Wall Street estimates of only $0.11 per share.
Drug maker Pfizer (PFE) announced that their fourth quarter net income quadrupled to $0.38 per share. The company cited strong sales growth both in their cholesterol-fighting drug Lipitor and their arthritis drug Celebrex.
Bellwether giant General Electric (GE) beat Wall Street estimates by a penny reporting earnings of $0.51 per share as revenues came in at $43.7 billion jumping 18%. The company cited an excellent global economy for their results. For 2005 the company also said that it was confident that it could post earnings growth of 10% to 15%.
II-VI Inc. (IIVI) reported their fiscal second quarter results this week. Net earnings were $0.39 per share or $5.7 million dollars up from only $0.23 per share or $3.4 million dollars a year ago. The company said “record revenues and bookings for the second quarter attest to the continued strong worldwide demand for II-VI products.”
Fortune Brands (FO) net income rose 59% to $249.5 million or $1.68 per share. Wall Street estimates had been for the company to earn only $1.21 per share. The consumer brands company and maker of such brands as Moen, Titleist, and Jim Beam said that sales increased 15% to $1.91 billion for the period. The company also said that they expect earnings growth in the double-digits for both the first quarter and 2005.
Johnson & Johnson (JNJ) announced that they would take advantage of the American Jobs Creation Act of 2004 by repatriating $11 billion of overseas earnings back into the United States. The Act allows corporations to repatriate earnings from overseas at the reduced tax rate of 5.25% versus the maximum 35%. It is expected that over $300 billion in corporate profits will flow back into the United States before the tax break expires at the end of 2005.
Shares of online auction company eBay (EBAY) were hit hard this week when the company reported disappointing fourth quarter earnings and first quarter guidance. The company reported earnings of $0.33 per share, which was a penny below analyst estimates. First quarter guidance also missed their mark. The street was expecting earnings estimates of $0.37 per share and the company gave guidance of only $0.34 to $0.35 per share.
In economic news the New York Empire State index which measures manufacturing activity missed economist estimates but continued to show strong economic growth for the region. Real estate continues to surprise on the upside. Housing Starts jumped 11% to 2.0 million and building permits rose to 2.0 million, both exceeding estimates. The Consumer Price Index for December fell 0.1% indicating that inflation at the consumer level remains under control. Economist had expected the CPI to come in unchanged.
The current yield curve for bonds remains flat as interest rates on the short end of the yield curve are expected to rise throughout 2005. Bond rates were lower across the board this week. The 5 year Treasury note closed yielding 3.63% and the 10 year and 30 year closed yielding 4.14% and 4.64% respectively.
Next week traders will continue to focus on earnings. Company missing earnings will be greatly punished by the market and those meeting or exceeding estimates will for the most part be greeted with cautious enthusiasm. I am currently still expecting earnings for the S&P 500 to post growth of 16% then return to more normal levels of growth for the first quarter. Companies in the earnings spotlight next week are Rayonier Inc. (RYN), Johnson & Johnson (JNJ), Merck (MRK), DuPont (DD), Electronic Arts (ERTS), Black & Decker (BDK), Amgen (AMGN), Getty Images (GYI), Microsoft (MSFT), Estée Lauder (EL), and Procter & Gamble (PG),
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