Wall Street Breakfast: Must-Know News 15 comments
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- Citi to boost lending. Under pressure to increase lending, Citigroup (C) plans to use $36.5B to issue mortgages, make credit card and other loans and buy distressed assets. According to CEO Vikram Pandit, "The government, on behalf of the American taxpayer, has invested in Citigroup. We have an obligation to repay in ways that go well beyond the $3.41B Citigroup will pay the government each year in dividends associated with its TARP investment." Citi also said it will not use TARP funds for bonuses, dividend payments, lobbying or marketing. Citi is also exploring the possibility of backing out of a nearly $400M marketing deal with the New York Mets.
- How much did BoA know? Despite rumblings from Bank of America (BAC) that it didn't know Merrill Lynch planned to pay bonuses in December rather than January, former Merrill CEO John Thain said BoA knew about every aspect of the December payouts. Lending support to Thain's claim is a private bonus agreement both firms signed in September when BoA agreed to buy Merrill. The document shows both firms agreed the discretionary bonus pool shouldn’t exceed $5.8B billion, and that 60% should be awarded in cash and 40% in equity or long term cash awards. The agreement also said that the distribution of bonuses to eligible Merrill employees "shall be determined by the company in consultation with the parent." The parent, of course, being Bank of America. The PR battle between Thain and Ken Lewis in the media will likely continue, though one wonders whether BoA can really try to deny this latest claim.
- Anxious UBS tried MS talks. UBS (UBS) discussed the possible sale of its U.S. brokerage division to Morgan Stanley (MS) late last year, sources say. The talks were preliminary and are unlikely to be revived, and though UBS is said to be no longer looking to sell the unit, it shows the dramatic steps the Swiss bank was willing to take to overhaul its business. The news will raise fresh questions about UBS's stratetegy as the bank suffers from credit-related losses and a U.S. tax investigation.
- Cheap oil hurts BP. BP (BP) swung to a Q4 loss as the global slowdown pulled down oil prices along with demand (see earnings details below). CEO Tony Hayward said the 'depressed' results mainly reflected the dramatic fall in crude oil prices and adverse effects from non-recurring events, notably a $700M loss at Russian joint venture TNK-BP Ltd. due to a time-lag on excise duty and other impairments. The company's clean replacement costs of supplies, a figure that strips out gains or losses from inventories and exceptional items, was $2.61B vs. consensus of $5.01B. Cash flow from operations will balance with spending at an oil price of $50-$60 per barrel.
- BoJ buyback scheme. Bank of Japan will buy ¥1T ($11.1B) of shares owned by Japanese banks to stabilize the financial system. The central bank will purchase stocks until April 2010, reviving a plan used more than four years ago when Japan was dealing with a domestic banking crisis. BoJ Governor Masaaki Shirakawa said the biggest risk facing Japanese banks "is not credit risk. It's volatility in share prices."
- Aussie rate cut, spending boost. Australia's central bank cut its benchmark rate to 3.25%, its lowest level in 45 years. The government also announced plans to spend an additional A$42B ($27B) to fight recession, with A$12.7B earmarked as handouts for families and A$28.8B for infrastructure spending.
- Sad stats of the day. According to real estate data service Zillow.com, the U.S. housing market lost $3.3T in value last year, and $1.4T in the fourth quarter alone. Nearly one in six homeowners with mortgages owe more on their home loans than the homes themselves are worth. Home values have fallen for eight straight quarters. "Negative equity will trigger new foreclosures, and that will add to inventory and depress prices."
- Personal income and outlays. Personal spending fell 1.0% in December, slightly worse than the -0.9% expected. Personal income was down 0.2% ($25.3B) vs. -0.4% consensus. Personal saving rose to 3.6%, the highest since May. But income and spending are worse than they sound, if you bear in mind December's data includes the Christmas shopping bump.
- ISM mfg index. The ISM Manufacturing Index came in at 35.6 in January, the 12th consecutive month of contraction. The only industries reporting growth were textiles and petroleum & coal products. Nonmetallic mineral products and electrical equipment led the laggards.
Earnings: Tuesday Before Open
- Archer Daniels Midland (ADM): FQ2 EPS of $0.91 beats by $0.23. Revenue of $16.7B (+1.1%) vs. $17.0B. (PR)
- Avon (AVP): Q4 EPS of $0.54 misses by $0.05. Revenue of $2.81B (-8.7%) vs. $2.85B. (PR)
- BP (BP): Q4 net loss of $3.3B. Replacement cost profit of $2.6B, down 24% Y/Y. Sales of $61.5B, down from $79.9B. Quarterly dividend raised to $0.14 from $0.1325. (PR)
- Celanese (CE): Q4 EPS of -$0.38 misses by $0.43. Revenue of $1.3B (-26.9%) vs. $1.4B. (PR)
- Dow Chemical (DOW): Q4 EPS of -$0.62 misses by $0.68. Revenue of $10.9B (-23.4%) vs. $13.3B. (PR)
- D.R. Horton (DHI): FQ1 EPS of -$0.20 beats by $0.32. Revenue of $885.8M (-44.9%) vs. $871.7M. Shares -27.8% premarket. (PR)
- Emerson Electric Company (EMR): FQ1 EPS of $0.60 beats by $0.03. Revenue of $5.4B (-1.9%) vs. $5.3B. (PR)
- Motorola (MOT): Q4 EPS of -$0.01 misses by $0.01. Revenue of $7.14B (-26%) in-line. Sees Q1 EPS of -$0.12 to -$0.10 vs. -$0.06. Will look to save $1.5B in costs in 2009. Suspends dividend. CFO Paul Liska to be replaced by SVP Edward Fitzpatrick on an interim basis. (PR)
- Myriad Genetics (MYGN): FQ2 EPS of $0.43 beats by $0.11. Revenue of $84.4M (+48.7%) vs. $78.9M. (PR)
- Schering-Plough (SGP): Q4 EPS of $0.39 beats by $0.09. Revenue of $4.3B (+16.8%) vs. $4.5B. (PR)
- Tyco International (TYC): FQ1 EPS of $0.61 beats by $0.14. Revenue of $4.43B (-8.5%) vs. $4.38B. (PR)
- Wisconsin Energy (WEC): Q4 EPS of $0.85 beats by $0.12. Revenue of $1.2B (+4.5%) vs. $1.0B. (PR)
Earnings: Monday After Close
- AFLAC (AFL): Q4 EPS of $0.98 misses by $0.02. Revenue of $4.26B (+6%) vs. $4.58B. Reaffirms 2009 guidance. (PR)
- Anadarko (APC): Q4 EPS of $0.16 misses by $0.01. Revenue of $3.81B (+24.4%) vs. $2.48B. (PR)
- Atheros Communications (ATHR): Q4 EPS of $0.17 beats by $0.02. Revenue of $98.3M (-28.8%) vs. $97.4M. (PR)
- Crown Holdings (CCK): Q4 EPS of -$0.09 vs. consensus of $0.17. Revenue of $1.88B (+0.3%) vs. $1.95B. (PR)
- Hologic (HOLX): FQ1 EPS of $0.31 beats by $0.02. Revenue of $429M in-line. Sees FQ2 EPS of $0.26-0.28 vs. $0.29 and revenue of $400-410M vs. $435M. (PR)
- Plum Creek Timber (PCL): Q4 EPS of $0.52 beats by $0.09. Revenue of $461M (-8.5%) vs. $446M. (PR)
- SanDisk (SNDK): Q4 EPS of -$1.65 vs. consensus of -$0.60. Revenue of $864M (-30.6%) vs. $767M. "Despite a very difficult pricing environment, macroeconomic turmoil and the impact on consumer purchasing, we delivered sequential revenue growth in Q4. However, we are very disappointed with our bottom line results, which included significant asset impairment and inventory related charges." (PR)
Today's Markets
- Asia markets closed mixed. Nikkei -0.6% to 7,826. Hang Seng -0.7% to 12,777. Shanghai +2.4% to 2,061. BSE +0.9% to 9,149.
- In Europe at midday, London -0.25%. Paris -0.3%. Frankfurt -0.4%.
- U.S. futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude +0.3% to $40.20. Gold -0.1% to $905.90.
Tuesday's Economic Calendar
- 7:45 ICSC Retail Store Sales
8:55 Redbook
10:00 Pending Home Sales
5:00 PM ABC Consumer Confidence Index - Notable earnings before Tuesday's open: ADM, ADP, AVP, BP, CAM, CE, CME, CMI, COCO, COL, DHI, DOW, EMR, ETR, HNT, IACI, KSU, LPX, MDU, MOT, MRK, MRO, MYGN, NNN, NOC, PEG, PNC, PRGO, SGP, TYC, UPS, WEC
- Notable earnings after Tuesday's close: ACE, ADS, BRE, CTX, DIS, ERTS, FISV, ILMN, LEG, MEE, MET, NLC, PXD, RVBD, TRMB, UNM, YUM
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 15 comments:
Look who's uttering the "D" word, Merill Lynch, Donald Trump to name a few. These people are not doom and gloomers, they have the most to lose.
With trillions of taxpayer dollars being spent to bailout wall street,banks and the worlds largest insurance company(A I G) TARP is a massive Gov't subsidy of the financial sector for their greed and incopmetence that caused the economic collapse in the first place. The wall street, bank and insurance co bail out with taxpayer money, is really taxation witout representation,and theres no end in sight.
The big firm layoffs are just the tip of the iceberg, there are other firms beneath them that will layoff just as quick or quicker. Most people are one job away from losing everything. People are over their heads with home equity loans, lines of credit, and credit cards.
Itg's estimated that 150000 retail store will shut down this year. Creating Ghost malls. This will lead to massive commerical loan defaults,the commercial realestate market is way over leveraged, much more than the residential realestate market.
Tourism creates 17 million jobs each year in the motel and lodging sector, expect massive layoffs in this sector yet this year.Then more loan defaults in this sector as well.
We are seeing a takeover in free enterprise in america, nationalized banking, the financial meltdown is a global meltdown.Riots in Iceland Latvia, Lithuania, Greece! This is just the begning. The whole face of america has changed " We the people" Now own the largest insurance company in the world, we own pieces of banks, we own auto companys,we own the largest mortgage companys.,
Some call it socialism, some call it fascism, the only thing you can't call whats going on in the United States is free market enterprise! It's a takeover, and the gov't will keep asking the to small to save for more and more.
Nah. Our "leaders" weren't that smart. When GM's market cap was $4B, they paid many times more Same with all the others. The gummint COULD HAVE bought 'em all, thrown out the incompetents running them into the ground and sold 'em to responsible companies at a profit, but no. Instead we "loaned" them far more than they're worth for promises of repayment even though we know they can never repay the money and left the same incompetents in charge that got them into the mess.
This is a business plan from hell. But it will keep the lights on in the Hamptons, Boulder and the riviera and the fuel tanks full on the yachts in the Caribbean. America's oligarchs will do at least as well as the Russkies.
Its hard for me a Democrat to hear the conservative Republicans winne about nationalizations when it is their 'borrow and spend' Reaganomics that brought our great country to its knees.
On Feb 03 10:03 AM auto44 wrote:
> Know nothing, YOU MAKE SOME GOOD POINTS BUT YOUR FIRST STATEMENT
> IS OUT OF LINE. It leads one to believe you are the only person in
> the country that knows anything and have a total grasp on the entire
> situation. No one is that smart and all knowing. Don't blame you
> for being angry, the congress has failed for so many years to act
> responsibily and protect and defend us. To busy pointing fingers
> at everyone else.
(Bank Of America, Citi, Merrill, etc) it's time to rename T.A.R.P. (Troubled Asset Relief Program)
to B.A.R.F. (Bad Asset Relief Program)
Chuck Schumer is on CNBC saying the "assets" in BARF are worth 65 cents on the dollar, BS! they are really worth about 22 cents. We are screwed! We are being stolen from and our grand children will have to pay it off.
On Feb 03 10:57 AM Econ 101 wrote:
> We are being stolen from and our grand children will
> have to pay it off.
It must be Tuesday.
1 Determining what was done by the "titans of Wall Street" that was counterproductive to proper functioning of the free enterprise system, prosecuting anything that was criminal;
2. Legislating to assure that which was technically legal, but hindered free markets from functioning efficiently, will not happen again;
3. Putting controls on those accepting government assistance that will assure the money is not abused and repaid promptly with interest.
We are where we are and we need to go forward in a positive way.
It is so very obvious that as a result of the merger, Thain was going to distribute the bonus money first, and worry about whatever consequences later. He also knew he was going to be fired by BofA soon anyway, so what did he have to lose while he had everything to gain?
I am old enough to remember honor, duty and country first. What the hell happened to us, other than Reagan lowering the tax rates on the very rich in the 1980's way down to where it was for almost everyone with a job? By Reagan doing that, the very rich kept much more of what they made, got way richer than they were before and had an even more exaggerated lifestyle while paying less than they should have for necessary national costs. To me, that was the start of all that has since come home to roost.
Until I saw that inflating effect on runaway greed and avarice here, I still had some confidence in this previous greatest country in the world. Not much left, to be sure.