Wall Street Breakfast: Must-Know News

• AIG carve up? Sources say AIG (AIG) is in advanced talks with U.S. officials about a radical restructuring plan that would split the troubled insurer into at least three government-controlled divisions. Described by one insider as a 'controlled break-up,' the move could end AIG's 90-year history of independence and serve as a model for carving up other troubled institutions. Under the plan, the government would swap its 80% stake in the insurer for large stakes in three units - AIG’s Asian operations, its international life insurance business and the US personal lines business. In return, officials would relax the terms of AIG's loans or even cancel a large portion of them. AIG would remain as a holding company but could disappear if the government decides to recoup taxpayer money by selling or listing the three divisions separately. The overhaul could be announced Monday.
• Citi deal imminent. Citigroup (C) is very close to an agreement to boost the government's stake in the ailing company to 40%, and an announcement could come as soon as today. Executives have been rushing to identify potential problems from an increased government stake, including local laws in certain countries that would require Citigroup to apply for new charters or, in the case of Mexico, to potentially give up some or all of ownership in Grupo Financiero Banamex, the No. 2 bank in Mexico by assets, if the government takes more than a 10% stake in Citigroup.
• The unstoppable budget deficit. The White House is projecting a $1.75T deficit for the current fiscal year, including a new $250B slush fund in case banks need more money. Officials say Obama has no plans to use the $250B, but wanted to include an 'overly conservative' placeholder just in case. The 134-page budget outlines health, tax and energy priorities, and includes a 10-year $634B reserve fund to help pay for Obama's proposed healthcare reforms and $537B for the U.S. military. The White House will also propose $634B in new taxes on upper-income Americans. The budget is due at 11:00 ET.
• UBS shakes up top job. In the latest shake-up of its top management, UBS (UBS) announced the surprise departure of CEO Marcel Rohner. The position will be filled by Oswald Grubel, the former CEO at rival Credit Suisse (CS). In a statement, UBS said Rohner had told the board last month that he planned to retire as CEO after the conclusion of the "ongoing investment bank repositioning and wealth management restructuring phase," but is now leaving immediately. Rohner's sudden departure comes after UBS agreed to a $780M settlement with the Justice Department and amid an ongoing civil inquiry into tax evasion. Shares +10.0% premarket (7:00 ET).
• Record loss at RBS. Royal Bank of Scotland (RBS) posted a full year loss of £24.1B ($34.3B), the biggest loss in British history. The record loss reflected a £16.2B write down against acquisitions and another £7.9B in operating losses. Reacting to the losses, RBS will put £325B of investments into a state insurance program. In return, the bank will pay a fee of £6.5B over seven years in the form of preference shares. RBS will also shift £540B of toxic assets to a new unit, including derivatives and mortgage-backed securities, and will increase lending by £50B over the next two years while aiming to reduce expenses by £2.5B. Shares +20.2% premarket (7:00 ET).
• Exelon gains ground in NRG bid. Exelon (EXC) said its $6B tender offer for NRG Energy (NRG) won more than 51% of the outstanding shares, giving it strong leverage in its hostile pursuit of NRG. NRG has already rejected Exelon's offer twice, saying the price 'manifestly undervalues' NRG and expressing doubt whether Exelon would be able to finance the transaction. Winning the tender gives Exelon the right to acquire NRG, assuming Exelon shareholders agree to the deal and it receives regulatory approval. However, Exelon has good reason to try for a friendly acquisition since it will make the regulatory approval easier and will allow Exelon access to NRG's books.
• BoA considers private bank sale. Bank of America (BAC) is reportedly looking to sell a private bank it inherited from Merrill Lynch. Merrill bought the bank in question, First Republic Bank, for $1.8B in September 2007. At the time, First Republic had $10B of deposits. Possible buyers include Goldman Sachs (GS) and Morgan Stanley (MS), both of which are trying to expand their deposit-gathering businesses.
• Another fraud bites the dust. The most recent financial fraud to come to light revolves around two money managers who have been accused of misappropriating at least $533M to fund their own lavish lifestyles. The two men, Paul Greenwood and Stephen Walsh, were arrested by the FBI and face criminal charges of conspiracy, securities fraud and wire fraud. They are accused of running a fraudulent investment-advisory scheme since 1996 in which the men raised $668M from institutional clients and pocketed most of the money. Alleged victims include Carnegie Mellon University, the University of Pittsburgh and the Iowa Public Employees Retirement System.
• Home sales fall. Existing Home Sales fell 5.3% to 4.49M/year in January, and are down 8.6% from a year ago. NAR's Lawrence Yun blamed the drop on would-be buyers waiting for more clarity on the nature of a government housing stimulus. Median prices -14.8% from a year ago.

Earnings: Thursday Before Open

• American Tower (AMT): Q4 EPS of $0.21 beats by $0.07. Revenue of $408M (+8%) vs. $407M. (PR)
• Boyd Gaming (BYD): Q4 EPS of $0.13 in-line. Revenue of $422.6M (-11.7%) vs. $423.4M. (PR)
• Cablevision (CVC): Q4 EPS of -$1.11 misses by $1.44. Revenue of $2.05B (+11.4%) vs. $2.06B. (PR)
• Continental Resources (CLR): Q4 EPS of $0.00 misses by $0.19. Revenue of $136M (-14.6%) vs. $160M. (PR)
• Digital Realty Trust (DLR): Q4 EPS of $0.20 beats by $0.06. Revenue of $147M (+3.6%) vs. $144M. (PR)
• Dynegy (DYN): Q4 EPS of -$0.01 beats by $0.01. Revenue of $795M (+9.8%) vs. $769M. (PR)
• El Paso (EP): Q4 EPS of $0.21 in-line. Revenue of $1.3B (+6.4%) vs. $1.2B. (PR)
• EMCOR Group (EME): Q4 EPS of $0.90 beats by $0.16. Revenue of $1.7B (-4.9%) vs. $1.8B. (PR)
• ENSCO International (ESV): Q4 EPS of $2.14 beats by $0.08. Revenue of $622M (+20.2%) vs. $616M. (PR)
• First American (FAF): Q4 EPS of $0.10 beats by $0.03. Revenue of $1.35B (-28%) vs. $1.43B. (PR)
• Frontier Oil (FTO): Q4 EPS of $0.32 misses by $0.09. Revenue of $1.35B (+2.2%) vs. $1.61B. (PR)
• Frontline (FRO): Q4 EPS of $1.03 misses by $0.08. Revenue of $452M (+36.2%) vs. $328M. (PR)
• GM (GM): Q4 EPS of -$9.65 misses by $2.25 (-that's a $9.6B loss). Revenue of $30.8B vs. $35.13B. GM burned through another $6.2B in cash. 2008 sales of 8.35M vehicles, down 11%. (PR)
• Global Industries (GLBL): Q4 EPS of -$0.24 misses by $0.17. Revenue of $250M (-4.8%) vs. $242M. (PR)
• HRPT Properties Trust (HRP): Q4 EPS of $0.05 in-line. Revenue of $218M (+9.7%) vs. $211M. (PR)
• Huntsman (HUN): Q4 EPS of -$0.38 misses by $0.33. Revenue of $2.05B (-18.2%) vs. $2.44B. (PR)
• Iron Mountain (IRM): Q4 EPS of $0.01 misses by $0.16. Revenue of $753M (+3.6%) in-line. (PR)
• King Pharmaceuticals (KG): Q4 EPS of $0.24 beats by $0.01. Revenue of $348M (-34.8%) vs. $345M. (PR)
• Lamar Advertising Company (LAMR): Q4 EPS of -$0.08 misses by $0.01. Revenue of $279M (-8.4%) vs. $285M. (PR)
• Limited Brands (LTD): Q4 EPS of $0.68 beats by $0.04. Revenue of $3.0B (-8.7%) in-line. (PR)
• Linn Energy LLC (LINE): Q4 EPS of $0.00 misses by $0.32. Revenue of $155M (+2.7%) vs. $163M. Shares -2.6% premarket. (PR)
• LKQ (LKQX): Q4 EPS of $0.10 misses by $0.04. Revenue of $470M (+13.4%) vs. $490M. (PR)
• MetroPCS Communications (PCS): Q4 EPS of $0.04 misses by $0.03. Revenue of $724M (+22.4%) vs. $765M. (PR)
• Nasdaq (NDAQ): Q4 EPS of $0.53 beats by $0.02. Revenue of $403M (-3.9%) vs. $414M. (PR)
• NII Holdings (NIHD): Q4 EPS of $0.05 misses by $0.38. Revenue of $989.5M (+5.3%) vs. $1.0B. (PR)
• Omnicare (OCR): Q4 EPS of $0.66 beats by $0.03. Revenue of $1.6B (+2.7%) in-line. (PR)
• RAIT Financial Trust (RAS): Q4 EPS of $0.33 misses by $0.05. Revenue of $57.4M (-1.7%) vs. $54.9M. (PR)
• Rowan Companies (RDC): Q4 EPS of $1.28 beats by $0.19. Revenue of $613M (-1.7%) vs. $615M. (PR)
• Safeway (SWY): Q4 EPS of $0.80 misses by $0.01. Revenue of $13.82B (+3.4%) vs. $14.29B. (beats by $0.26. Revenue of $13.3B (-11.9%) vs. $14.0B. (PR)
• Sonus Networks (SONS): Q4 EPS of -$0.37 misses by $0.35. Revenue of $89.5M (-7.8%) vs. $64.1M. (PR)
• Southern Union Company (SUG): Q4 EPS of $0.47 beats by $0.03. Revenue of $727M (+75.3%) vs. $692M. (PR)
• Warnaco Group (WRC): Q4 EPS of $0.29 beats by $0.14. Revenue of $446M (-4.4%) vs. $451M. (PR)

Earnings: Wednesday After Close

• Aruba Networks (ARUN): FQ2 EPS of $0.02 beats by $0.02. Revenue of $47.7M (+17.5%) vs. $45.5M. Shares +11.6% AH. (PR, earnings call transcript)
• Assured Guaranty (AGO): Q4 EPS of $0.04 beats by $0.03. Revenue of $123.3M (+22.1%) vs. $135.6M. (PR)
• Avis Budget Group (CAR): Q4 EPS of -$1.08 misses by $0.61. Revenue of $1.26B (-9%) in-line. Shares -2% AH. (PR)
• Express Scripts (ESRX): Q4 EPS of $0.83 in-line. Revenue of $5.51B (-0.9%) vs. $5.45B. Shares -1.6% AH. (PR)
• El Paso (EP): Sees 2009 EPS of $0.85-1.05 vs. $1.11 consensus. Shares -2.65% AH. (PR)
• Flowserve (FLS): Q4 EPS of $20.3 beats by $0.14. Revenue of $1.17B (+5.4%) vs. $1.26B. Shares +7.3% AH. (PR)
• Fluor (FLR): Q4 EPS of $1.04 beats by $0.12. Revenue of $6.07B (+28.9%) vs. $5.81B. Sees 2009 EPS of $3.90-4.20 vs. $3.76. Shares +12.3% AH. (PR, earnings call transcript)
• Genco Shipping (GNK): Q4 EPS of $1.55 misses by $0.01. Revenue of $101.6M (+54.6%) vs. $100.2M. Shares +1.5% AH. (PR)
• Goodrich Petroleum (GDP): Q4 EPS of -$0.01 beats by $0.06. Revenue of $44.1M (+35.7%) vs. $49.9M. (PR)
• Medicis Pharmaceutical (MRX): Q4 EPS of $0.42 beats by $0.11. Revenue of $136M (+1.4%) vs. $127M. Sees Q1 EPS of $0.15-0.18 vs. $0.30 and revenue of $125-130M vs. $129.5M. (PR)
• Netease.com (NTES): Q4 EPS of $0.65 beats by $0.21. Revenue of $117.5M (-0.6%) in-line. Shares +5.3% AH. (PR)
• Plains Exploration & Production Company (PXP): Q4 EPS of -$0.31 misses by $0.73. Revenue of $-33.5M vs. $328M. Shares -6.9% AH. (PR)
• Salesforce.com (CRM): Q4 EPS of $0.11 beats by $0.04. Revenue of $290M vs. $285M. Sees full-year EPS of $0.54-0.55 vs. $0.51. "Salesforce.com is proud to be the first billion dollar cloud computing company." Shares +5.3% AH. (PR, earnings call transcript)
• Savient Pharmaceuticals (SVNT): Q4 EPS of -$0.45 misses by $0.12. (PR)
• Service International (SCI): Q4 EPS of $0.09 beats by $0.01. Revenue of $517M vs. $510M. Sees 2009 EPS of $0.26-0.36 vs. $0.38. Shares -0.3% AH. (PR)
• Tenaris (TS): Q4 EPS of $1.01 beats by $0.02. Revenue of $3.23B vs. $3.01B. Shares -5.4% premarket. (PR)
• True Religion Apparel (TRLG): Q4 EPS of $0.53 beats by $0.06. Revenue of $73M (+38.5%) vs. $68.7M. Shares flat AH. (PR)
• USEC (USU): Q4 EPS of $0.16 in-line. Revenue of $432M vs. $440M. Sees 2009 revenue of $2.2-2.25B vs. $2.01B consensus. Shares -0.6% AH. (PR)

Today's Markets

• Asia stocks end Thursday mostly lower, with China pacing losses on a late-day selloff. Nikkei -0.04% to 7,458. Hang Seng -0.85% to 12,895. Shanghai -3.87% to 2,121. BSE +0.59% to 8,955.
• Europe markets have moved off their highs but remain up at midday, with banks leading the way after details of the U.K. asset protection scheme seem to be less onerous than originally feared. London +1.5%. Paris +1.5%. Frankfurt +1.8%.
• U.S. stock futures are higher in a volatile premarket session as traders await a slate of data including Jan. durable-goods, new home sales and weekly jobless claims. Dow +1.05% to 7304. S&P +1.2% at 771. Nasdaq +1%. Crude +1.8% to $43.30. Gold -1.9% at $947.70.

Thursday's Economic Calendar

• 8:30 Durable Goods Orders
  8:30 Jobless Claims
  10:00 New Home Sales
  10:30 EIA Natural Gas Report
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ALO, AMT, BYD, CLR, CVC, DLR, DYN, EME, EP, ESV, FAF, FRO, FTO, GLBL, GM, HRP, HUN, IRM, KG, LAMR, LINE, LKQX, LTD, NDAQ, NIHD, OCR, PCS, RAS, RDC, SHLD, SONS, SUG, SWY, WRC
• Notable earnings after Thursday's close: ADSK, BEE, BID, BVN, CTV, CVA, DELL, FCH, GPS, HANS, HGSI, IO, KSS, LEAP, ME, NOVL, PSA, RSG, SBAC, SD, SGMS, SNH, SWN

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[axelrod608:]

GM loses almost as much as their market cap in one quarter and still there are people who think it can be saved ? It's looking like the next shoe to drop. The "poster child" for unsustainability.

Any conceivable "restructuring plan" is going to require a big dose of black magic.

Feb 26 09:06 AM

[hypObamacrite:]

GM is a mirror of our gov't. Big pension liabilities,misguided future vision, terrible mismanagement and an addiction to credit. Not to mention the bullying by the union. They will never sell enough cars to pay any loans back.
A whole generation of car buyers never considers GM as a choice. They are embarrassed by the brand names. Who wants to say they drive a Malibu, a girl maybe.

Feb 26 09:28 AM

[kruser53:]

Watch AIG. This could be the model for C.

Feb 26 09:33 AM

[Philly Jim:]

A friend of mine works for General Motors and says they throw away/waste tens of millions of dollars a day in throwing away perfectly good parts, lavish executive meetings, ridiculous accommodations for incorrigible employees and highly unproductive employees that are protected by the Union.

Feb 26 10:22 AM

[AndrewBaker:]

"Restructuring" is a great euphemism for propping up and keeping open a bankrupt business, whether it's GM or any number of banks, insurers and financial firms that frankly have been insolvent for some time. I don't pretend to know which ones to save and which to let fail, but I do know I don't like my tax dollars being used to support greedy and not very competent bosses and workers whilst I'm doing all I can to pay my debts and bills and support my family.

Feb 26 10:54 AM

[staples - w...:]

so, how will this affect the 'troubled $ soaking up' but wothsaving banks, ex; Bankof America and Citigroup.

Reports of a possible new deal for C today of government taking 40% interest in C. mixed emotions and mixed understanding

Thoughts, ideas,laughs

Weebs

thedoejokesreport.com

Feb 26 11:07 AM

[agneaux:]

Well over 1,000 automobile companies have come & gone in the USA in the last hundred years. Very few of them received bailout money from the government before they went under (Chrysler comes to mind in the 80's; were there others?). Peerless, Duesenberg, Pierce-Arrow, Packard, Studebaker, Nash, Hudson, Kaiser-Frazer, and DeSoto are some of the big ones that experienced a dignified demise without benefit of bailouts. Why should we give bailout money to the last three? No, they (Ford, Chrysler, GM) should declare bankruptcy if necessary (as allowed for in our Constitution), then the market can re-value their malinvestments, and someone can then buy what's left at fire sale prices. Same goes for banks, investment houses, insurance firms, etc. Let them fail, and then let someone else, presumably with better financial sense, pick up the pieces. That's what happens under a free market capitalist system. What we have now is apparently either Socialist, Fascist or Communist, depending on your point of view. We haven't had real Capitalism since at least 1913. We are not truly free unless we're free to fail.

Feb 26 02:27 PM

[Big-P:]

For all of you following my investment advice, stick with the ultra-short ETF's I told you to buy and avoid buying stocks during the next 5 sessions.

-Big-P

Feb 26 03:21 PM

[PeteK:]

Few people talk about why many big industries either folded up or left this country.
The root of evil is the American workers themselves who blindly followed the union's destructive way of ideas and actions.
Greed and disloyalty that made a business impossible to survive.
This culture and thinking must be changed, or business will disappear.
It's that simple.

Feb 27 03:30 AM

[bobbobwhite:]

We now may be seeing what happens at the end cycle of capitalism. It may be that capitalism eventually corrupts each person in it so totally that at the end, it becomes unworkable and collapses as a system due primarily to the dishonor, lies, deceit and criminality resulting from the incremental growth of runaway selfish greed over the years that served to place the good of the individual above the good of society as a whole.

The big question that must be answered is whether we humans can build and then perpetually maintain any socioeconomic system that serves primarily the ultimate good of society, or, as a result of successive proven inablities to achieve that goal, are we now or will we soon become just another of the millions of earth's previous abject evolutionary failures?

Feb 27 10:35 AM

[James H. Wang:]

End cycle of capitalism, bobbobwhite?

This is a system that has helped pull the entire world into a new age, bringing millions out of poverty and in absolute terms, prosperity.

Even now, though we can't splurge, I'd say we're far better off than living on the edge of subsistence.

Capitalism does not always mean corruption. The pursuit of opportunities, if you define that as "corruption," we might as well have never left our caves.

The system, just like any tool, just is. In the end, it's what people do with it that bring morality into—or drive it out of—society.


On Feb 27 10:35 AM bobbobwhite wrote:

> We now may be seeing what happens at the end cycle of capitalism.
> It may be that capitalism eventually corrupts each person in it so
> totally that at the end, it becomes unworkable and collapses as a
> system due primarily to the dishonor, lies, deceit and criminality
> resulting from the incremental growth of runaway selfish greed over
> the years that served to place the good of the individual above the
> good of society as a whole.

Feb 27 05:50 PM