Wall Street Breakfast: Must-Know News

• Fending off foreclosures. Obama unveiled a larger-than-expected $75B housing relief plan yesterday, and set aside $200B of new backing for Fannie Mae (FNM) and Freddie Mac (FRE). The plan will allow as many as 5M homeowners who are underwater or have little equity in their homes to refinance their loans through Fannie and Freddie, and will encourage lenders to modify loan terms. Though the plan drew praise for its use of incentives, critics said it left many issues unsolved, including the difficulty of altering loans packaged into securities or loans not connected to Fannie/Freddie. Many Republicans were also wary of the plan, concerned it will only delay inevitable foreclosures. Notably, the plan will not try to spur demand for real estate and will focus solely on existing at-risk homeowners.
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• FOMC minutes show recovery doubts. The Fed released minutes from its Jan. 27-28 FOMC meeting, showing participants are beginning to doubt the possibility of an economic turnaround in 2009 and are uncertain about the coming quarters. Also notable was Lacker's dissent: "...he saw no evidence of market failures that made targeted credit programs, including the forthcoming TALF, necessary. Moreover, he was concerned that such programs channel credit away from other worthy borrowers, amount to fiscal policy, would exacerbate moral hazard, and might be hard to unwind." The Fed also released updated economic projections yesterday, forecasting a deeper contraction and an unemployment rate near 9% by the end of the year. (Read the full FOMC minutes)
• Not-so-secret Swiss bank. UBS (UBS) will turn over the names of around 250 clients as part of a $780M settlement with U.S. prosecutors over a wide-ranging tax-evasion probe. The agreement marks the first time Swiss financial regulators have allowed a Swiss bank to reveal the identity of account holders, with some Swiss lawmakers warning that destroying the secrecy associated with Swiss banks could ruin the country's banking industry. UBS' agreement will settle the criminal case against the bank but not the civil one filed by U.S. tax authorities who have subpoenaed UBS to turn over the names of 19,000 clients believed to be avoiding taxes. Shares +4.8% premarket (7:00 ET).
• Nestle's net jumps. Nestle (NSRGY.PK) remains cautiously upbeat for 2009 after reporting strong underlying 2008 sales growth of 8.3%. Full year net profit rose 69% to 18B Swiss francs ($15.35B) vs. consensus of 20B francs, helped by a 9.2B franc gain on the sale of part of U.S. eyecare firm Alcon (ACL). Sales rose 2.2% to 109.9B francs. Underscoring its confidence for 2009, the company proposed a dividend increase of 14.8% to 1.40 francs/share and said it would buy back around 4B francs of shares. The world's biggest food group remained vague about the future of its 29% stake in L'Oreal, saying the company will continue its strategic review and doesn't need to take 'any action or decision' when part of its contract expires in April.
• HP packs down outlook. Hewlett-Packard (HPQ) released Q1 earnings (see details below) and cut its full-year outlook, sending shares down nearly 6% in after hours trading. HP expects last quarter's weak market conditions to persist and believes exchange rates will continue to hurt revenue. The FY 2009 revenue forecast was cut to around $112.5B vs. $118.4B recorded last year and a November forecast that sales this year would rise as high as $130B. CEO Mark Hurd stressed HP's plans to create a leaner cost structure, explaining "we just don't want to bank on the fact that the economy is going to get better."
• Mortgage apps rise. Mortgage applications surged 45.7% from a week ago, MBA said, on a seasonally adjusted basis. The average interest rate on 30-year fixed-rate mortgages decreased to 4.99% from 5.19%.
• Retail sales rise. Retail chain store sales rose 0.9% from a week ago, ICSC reported, and dropped 0.9% Y/Y. "Seasonally warm weather combined [with] discounts helped to drive demand for spring fashion while Valentine's Day spending also contributed to the improvement." According to Redbook, national chain store sales rose 0.9% in the first two weeks of February vs. a 0.5% expected gain. Sales -1.6% Y/Y.
• Housing starts drop. Housing starts fell 16.8% in January from a month ago to 466K/year. Permits dropped 4.8% from December to 521K/year. Completions declined 24.2% to 776K/year. From a year ago, the trio are down 56.2%, 50.5% and 41.7% respectively. Though the housing starts data was bad, commented economist Michael Darda, "do we really want housing starts to rise with housing inventories still close to record levels relative to sales? No, we don’t."
• Industrial production weakens. Industrial Production fell 1.8% in January from December (vs. -1.5% consensus), and is down 10% from a year earlier. Manufacturing was down a broader 2.5%, led largely by a plunge in auto production. Prior revised to -2.4% from -2%. Capacity utilization fell to 72% from 73.3%.
• Import/export prices. Import Prices fell 1.1% (vs. -1.2% consensus) in January, the sixth month of declines, but export prices rose 0.5% for the first time in half a year. Import prices are down 12.5% from a year ago. Price indexes for consumer goods, capital goods, and foods, feeds, and beverages were unchanged.
• BoJ holds rate steady. As expected, the Bank of Japan kept interest rates unchanged at 0.1%, but announced several steps to try to ease the credit crunch. The bank extended the deadline for its commercial paper buying plan and will boost the supply of low-cost funds.

Earnings: Thursday Before Open

• Apache (APA): Q4 EPS of $0.82 misses by $0.44. Revenue of $1.9B (-35.8%) vs. $2.2B. (PR)
• CenturyTel (CTL): Q4 EPS of $0.88 beats by $0.06. Revenue of $642.6M (-2.3%) vs. $642.2M. (PR)
• CVS Caremark (CVS): Q4 EPS of $0.70 beats by $0.01. Revenue of $24.1B (+10%) vs. $23.3B. (PR)
• Diana Shipping (DSX): Q4 EPS of $0.72 in-line. Revenue of $84.3M (+43.1%) vs. $81.9M. (PR)
• Expedia (EXPE): Q4 EPS of $0.22 misses by $0.02. Revenue of $621M (-6.7%) vs. $631M. (PR)
• Gerdau AmeriSteel (GNA): Q4 EPS of -$0.16 misses by $0.33. Revenue of $1.4B (-17.2%) in-line. (PR)
• Goldcorp (GG): Q4 EPS of $0.12 beats by $0.01. Revenue of $609M (-10.4%) vs. $627M. (PR)
• Newmont Mining (NEM): Q4 EPS of $0.26 beats by $0.01. Revenue of $1.3B (-4.8%) vs. $1.4B. (PR)
• Noble Energy (NBL): Q4 EPS of $0.91 beats by $0.12. Revenue of $573M (-37.8%) vs. $780M. (PR)
• Pan American Silver (PAAS): Q4 EPS of -$0.41 vs. consensus of $0.10. Revenue of $46.3M (-46.1%) vs. $75M. (PR)
• Patterson Companies (PDCO): FQ3 EPS of $0.45 beats by $0.01. Revenue of $811M (+4.4%) vs. $806M. (PR)
• Pride International (PDE): Q4 EPS of $1.13 beats by $0.08. Revenue of $621.6M (+28.9%) vs. $630.5M. (PR)
• Regal Entertainment Group (RGC): Q4 EPS of $0.18 misses by $0.08. Revenue of $712M (+18.6%) vs. $722M. (PR)
• Reliance Steel & Aluminum (RS): Q4 EPS of $1.07 beats by $0.46. Revenue of $2.1B (+25.6%) vs. $1.9B. (PR)
• Sprint Nextel (S): Q4 EPS of -$0.01 beats by $0.02. Revenue of $8.43B (-14.4%) vs. $8.55B. Sees subscriber losses in 2009 less than in 2008, excluding WiMAX. Expects to generate positive free cash flow in 2009. Says it has enough cash to meet debt requirements through 2010. (PR)
• Watson Pharmaceuticals (WPI): Q4 EPS of $0.53 beats by $0.03. Revenue of $645M (+2.9%) vs. $634M. (PR)
• Williams Companies (WMB): Q4 EPS of $0.35 beats by $0.05. "We expect 2009 to be a challenging year in the industry, but Williams' liquidity is strong, we have no significant debt payments until 2011 and we are making significant reduction in our capital spending..." Shares -8.3% premarket. (PR)
• XTO Energy (XTO): Q4 EPS of $0.68 misses by $0.10. Revenue of $1.96B (+23.3%) vs. $2.05B. (PR)

Earnings: Wednesday After Close

• Advance Auto Parts (AAP): Q4 EPS of $0.51 beats by $0.14. Revenue of $1.19B (+8%) vs. $1.15B. Shares +6.6% AH. (PR)
• Agnico-Eagle Mines (AEM): Q4 EPS of $0.00 beats by $0.01. Revenue of $36.4M. Shares -0.2% AH. (PR, earnings call transcript)
• Analog Devices (ADI): FQ1 EPS of $0.18 beats by $0.02. Revenue of $477M in-line. Sees FQ2 EPS of $0.08-0.09 vs. $0.10 and revenue down 5-15% sequentially. Shares -0.1% AH. (PR, earnings call transcript)
• Baidu.com (BIDU): Q4 EPS of $1.31 misses by $0.01. Revenue of $132.2M in-line. Shares -0.3% AH. (PR, earnings call transcript)
• Brandywine Realty Trust (BDN): Q4 FFO of $0.75 beats by $0.21. Revenue of $155M (-2.9%) vs. $144M. Shares +0.6% AH. (PR)
• Blue Nile (NILE): Q4 EPS of $0.24 misses by $0.11. Revenue of $85.8M (-23.3%) vs. $93.4M. "Given the uncertainty surrounding the economic environment and consumer spending, we are not providing financial guidance at this time." Shares -9.6% AH. (PR)
• CBS (CBS): Q4 EPS of $0.34 beats by $0.08. Revenue of $3.53B (-6%) in-line. Cuts dividend to $0.05 from $0.27, which it says will "further strengthen our financial flexibility to meet our debt obligations even in difficult credit markets, and still provide our shareholders with an attractive dividend." Shares +6.4% AH. (PR, earnings call transcript)
• Dress Barn (DBRN): FQ2 EPS of -$0.02 misses by $0.03. Revenue of $343M vs. $341M. Affirms full-year guidance of $0.70-0.85 vs. $0.81. Shares +7.8% AH. (PR, earnings call transcript)
• Federal Realty Investment Trust (FRT): Q4 FFO of $1.02 beats by $0.02. Revenue of $134M in-line. Sees 2009 FFO of $3.80-3.92 vs. $3.94. Shares flat AH. (PR)
• Hewlett-Packard (HPQ): FQ1 EPS of $0.93 beats by $0.07. Revenue of $28.8B vs. $28.5B. Sees FQ2 EPS of $0.84-0.85 vs. $0.89 consensus and revenue down 2-3%. Shares -4.3% AH. (PR, slides, earnings call transcript)
• Ingram Micro (IM): Q4 EPS of $0.59 beats by $0.22. Revenue of $8.68B (-13.2%) vs. $8.87B. Sees Q1 sales down low-to-mid-twenties percent. Shares -0.9% AH. (PR, earnings call transcript)
• Kinross Gold (KGC): Q4 EPS of $0.09 misses by $0.03. Revenue of $484M (+72.1%) vs. $506M. Shares -2.5% AH. (PR)
• LDK Solar (LDK): Sees Q4 revenue of $415-425M vs. $432M. Expects a $210-220M writedown against inventories whose price was deflated by falling solar wafers pricing. Shares -13.4% AH. (PR)
• Nationwide Health Properties (NHP): Q4 FFO of $0.56 in-line. Revenue of $96.5M (+15.4%) vs. $94.1M. Sees 2009 FFO of $2.20-2.25 to $2.31. (PR) (-from. Wed. evening)
• Navios Maritime (NM): Q4 EPS of $0.03 misses by $0.07. Revenue of $213M (-30.9%) vs. $210M. (PR) (-from Wed. evening)
• Oceaneering International (OII): Q4 EPS of $0.93 in-line. Revenue of $526M (+9.2%) vs. $521M. Sees Q1 EPS of $0.60-0.70 vs. $0.76. Shares -0.8% AH. (PR)
• O'Reilly Automotive (ORLY): Q4 EPS of $0.37 beats by $0.07. Revenue of $1.11B (+84.5%) vs. $1.05B. Sees 2009 EPS of $1.83-1.87 vs. $1.79 consensus. (PR) (-from Wed. evening)
• priceline.com (PCLN): Q4 EPS of $1.29 beats by $0.24. Revenue of $406M (+21.2%) vs. $378M. Sees Q1 EPS of $0.85-0.95 vs. $0.81 and revenue up 5-10% Y/Y. Shares +12.9% AH. (PR, earnings call transcript)
• Skechers (SKX): Q4 EPS of -$0.44 beats by $0.03. Revenue of $298M (-1.3%) vs. $293M. Shares +0.3% AH. (PR, earnings call transcript)
• Synopsys (SNPS): FQ1 EPS of $0.50 beats by $0.09. Revenue of $340M (+7.7%) vs. $335M. Shares +3.1% AH. (PR, earnings call transcript)
• Trinity Industries (TRN): Q4 EPS of $0.58 misses by $0.04. Revenue of $884M (-19.9%) vs. $1.03B. Sees Q1 EPS of $0.20-0.30 vs. $0.35. Due to uncertain economy, declines to give guidance beyond Q1. Shares +2.4% AH. (PR)
• Whole Foods Market (WFMI): FQ1 EPS of $0.20 beats by $0.05. Revenue of $2.47B (+0.4%) in-line. Sees full-year EPS of $0.71-0.76 vs. $0.66 and revenue of $185M vs. $178M. Shares +9.1% AH. (PR, earnings call transcript)

Today's Markets

• Asia markets posted modest gains Thursday. Nikkei +0.31% to 7,558. Hang Seng +0.06% to 13,023. Shanghai +0.78% to 2,227. BSE Sensex +0.3% to 9,043.
• Europe stocks are mixed-to-flat at midday. London -0.2%. Paris -0.1%. Frankfurt +0.3%.
• Stock futures moved higher in the overnight session. Dow +0.8% to 7540. S&P +1% to 787.50. Nasdaq +0.7%. Crude +3.1% to $38.58 (inventories at 10:30). Gold -0.2% at $977.
• Treasury futures are lower. 30-year -0.44%. 10-year -0.33%. 5-year -0.14%. 2-year flat.

Thursday's Economic Calendar

• 8:30 Producer Price Index
  8:30 Jobless Claims
  10:00 Leading Indicators
  10:00 Philadelphia Fed Survey
  10:30 EIA Natural Gas Report
  11:00 EIA Petroleum Status
  1:15PM Fed's Lockhart speaks on the U.S. economy
  4:30 PM Money Supply
• Notable earnings before Thursday's open: APA, CTL, CVS, DSX, EXPE, GG, GLBL, GNA, MGM, NBL, NEM, PDCO, PDE, RGC, RS, S, WMB, WPI, XTO
• Notable earnings after Thursday's close: ANH, BRCD, BUCY, CECO, CENX, CROX, CYH, DRYS, GW, INTU, LHO, MYL, OSIP, RIO, SAPE, TSO

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[eddie6442:]

Another $75BB wasted, which could largely have been avoided by "eliminating one paragraph in the mortgage contract that puts a loan in default when the market value drops lower than the mortgage" -- EVEN WHEN THE MONTHLY PAYMENTS ARE CURRENT...........

Another example of the Mark-to-Market mentality which has cost the taxpayer $2TT in Bailouts, as well as Investors $7TT of Net Worth...........

Isn't it apparent to a growing majority of Americans that [1] Driving the economy down is an Objective; [2] Redistribution of Wealth a Priority; and [3] Social & Economic Equality where everyone has little and is Dependent ................. is the END GAME?????????????

On a Clear Day, You can see Forever!!!!!!!!!!!!

IMHO

Feb 19 08:09 AM

[dave mckay:]

Every car loan would be that way as soon as you drove it off the lot, eddie. And when you get a 7 year car loan, you are underwater for quite a few years.

Feb 19 09:07 AM

[axelrod608:]

The piddling little being applied to the mortgage crisis - the major factor in the national economic downward spiral - will be ineffective. If the federales don't do something radical in that area, the downward spiral will persist.

Reducing mortgage payments by a few percentage points of income will not stimulate spending. All the current programs are a product of inside-the-box thinking.

Have the government pay off mortgages in full as foreclosures happen, taking a lien of up-to the amount it costs to pay it off. The lenders are made whole - no loss to write off and plenty of money to lend again.

Let the people stay in the house. They would be barred from taking out any equity loans on the property. With no mortgage payment, they will start spending again. Some payment plan should be started if they are still in the house after a period of time. Those payments would go directly to pay down the cost of the program.

When the home sells, the government gets the net up to the amount they bought the mortgage for.

This is the ONLY way to stem the tide of foreclosures. There are millions of ARM's out there that will be resetting well into 2012. They will be a continuing source of new foreclosures wel into 2013 unless "foreclosure" is eliminated. And the only way to make the financial sector whole is to pay off those mortgages.

Eliminate foreclosures or they will persist for another five years, and all the other related problems will stay with us as well.

Feb 19 09:56 AM

[hanson001:]

I watch very closely as Obama makes his public rounds. The way a great deal of people react to his presence reeks of idol worship. I mean, please, all the screaming and crying. All we need now is 150 days of games and free bread tossed into the stands.

The government needs to keep its dirty hands out of the markets. The moral hazard all this activity is creating will destroy us. Everyone is trying to save this economy, eventhough many saw years ago this day would come. All this tampering, trying to get back to the way things were, keeps the markets confused and introduces too many new variables in an already complex global economy.

Let nature take its course. We will probably have to nationalize the banks for a time to be able to wipe out all stakeholders (including me) and the dirty rotten CEOs and managers who after studying risk in business school, allowed the institutions to be run like some kind of gambling house.

Pain is good. It teaches one some important lessons. And letting businesses and consumers go bankrupt will allow dollars to go to more capable hands to eventually re-employ the idiots that got us into this mess, that is, the greedy business and consumer that leveraged too much.

Get ready for your lost decade friends.

Feb 19 10:54 AM

[axelrod608:]

>> "Let nature take its course." >> ? Even if it destroys the national economy ? The losses are in the tens of Trillions of dollars.

>> "Pain is good." >> Not if the patient dies.

>> "The moral hazard all this activity is creating will destroy us" >> It's hard to tell which is more certain to cause unchangeable economic destruction - the debt crisis or the bailouts.

NOBODY is more opposed to corporate welfare than me. I'd like to see an amendment to the constitution requiring ALL governments to keep balanced budgets and remove ( imprison ?)all executive and congressional members who break it. I'd like to make government debt illegal. I'd like to see government expenditures capped at 5% of GDP. And I'm realistic enough to know it ain't gonna happen.

Reading through Seeking Alpha's many mortgage related articles, I see huge numbers of "thumbs down" on every comment about fixing the mortgage problem. Folks, if the government is going to spend money - and they are - it is in our best interest to try to make them do it wisely and in a manner that actually solves the problem. So far, what they've done and are planning to do is pure WASTE and it will have noi significant long term effect on foreclosures.

The plan I posted above would STOP foreclosures and it would make the idiots who bought homes they could not afford PAY for it. Is this not what we all want ?

I fear that letting foreclosure and bankruptcy take its course will also devastate the national economy, putting us ALL in severe economic distress. Again, is that what people want ?

I want to teach the greedy and stupid a lesson as much as the next guy, but if the price for doing that is to ruin the entire country, it's too much to pay just for a little payback.

Our government IS COMMITTED TO THROWING AN UNGODLY AMOUNT OF MONEY AT THIS PROBLEM. NOTHING WILL STOP THEM.

For heaven's sake lets make them do it in an effective manner, in a way that will SOLVE the problem.

Feb 19 01:45 PM

[hanson001:]

The economy is already destroyed and the factors of production must be allowed to move towards their natural equilibriums. What we are doing now will prolong the pain as we muddle through as the goverment moves the most certain cliff a little each time we near it. We desire to hold on to what we have lost but this will hurt the generations that come after us. If we don't realize this, we are no different from the politicians and institutions that got us into this mess.

The patient is already dead in his coma like state. All I ask is that you unplug the machine to save electrons. We are going to need them later.

Feb 19 02:05 PM

[jeff60607:]

I think there are valid arguments on both side about this government plan. Will it raise the budget deficit? Probably. Will it help? That’s a good question. I think economies go through cycles and this might be one of them. I read a good article on recessions and their history on

www.recessioninfocente...

Feb 19 03:18 PM

[bobbobwhite:]

Ever since the Civil War, social anarchists have been trying to get America to "redistribute the wealth", giving an equal amount of money to all Americans regardless of race or color. My idiot nephew is one of those anarchists.

The problem with that moronic and shortsighted thinking is that in a short time, it would all be "redistributed" right back to the way it is now just like water seeks its own level. Giving money to the irresponsible doesn't change them into responsible citizens, it just gives them a good time until all the money is gone. My granny used to say, "some poor folks people are poor by circumstance, but most are poor by nature." So true.

Is redistribution what Obama is now trying to do? And, is it really just another way of getting "reparations" ?

Feb 20 11:13 AM

[bobbobwhite:]

Forget about sweeping gov't changes as a result of this economy. The day we allowed lawyers to become professional politicians is the tragic day we let our country down, as sheep always do. These guys make the laws now that suit them, not us. Do you think that will ever change?

Politics used to be a way station within a successful career, a place where you stopped for a few years and then returned to your profession after a public service stint well done. Now it's a profession like any other, but others don't have the influence or the money that "gov't service" and "elected office" has today. That's what brought all the slicksters we have now into it, and they will never leave.

Feb 20 01:39 PM