Wall Street Breakfast: Must-Know News

• CIT to get much smaller. CIT Group (CIT) reportedly turned down offers from Berkshire Hathaway (BRK.A) and Leucadia National Corp. (LUK) last spring to buy parts of the lender because the offer prices were too low. CIT is now being forced to evaluate a similarly structured breakup as it faces potential bankruptcy, with its aviation-finance and rail-finance operations units the most likely to be sold. CIT will likely keep its vendor-financing department, but could shed its vendor-financing business.
• White House wants to fold OTS. The White House submitted a proposal to Congress to fold the Office of Thrift Supervision into the larger Office of the Comptroller of the Currency, which oversees commercial banks, and to empower the SEC to administer the resolution of large financial firms that operate brokerages. The plan, which is part of a broader effort to create a process for unwinding systemically important institutions that are failing, would try to end the practice of escaping regulation by acquiring a thrift and organizing as a unitary thrift holding company. (Read the Treasury's fact sheet)
• Stock indices head up and away. Better-than-expected quarterly earnings reports have helped stock indices surge forward. The Dow Jones Industrial Average closed at 9,069.29, its first time above 9,000 since January, for a 38.5% gain in less than five months. The S&P 500 has erased half its losses since September, and the Nasdaq is on its longest streak of gains since 1992. Skeptics warn the sharp gains are just a set-up for a sharp pullback.
• Fed seeks consumer protection overhaul. The Federal Reserve submitted its own proposal to Congress yesterday, detailing sweeping new consumer protections for mortgages. Among the proposals were a ban on side payments to mortgage brokers for pushing clients to higher-cost loans and plans to overhaul the content and timing of disclosures to consumers. (Read the Fed's press release)
• SEC sues over fake takeover reports. SEC officials filed a civil lawsuit against Hazem Khalid Al-Braikan, a respected Kuwaiti financier, alleging he made millions in suspicious profits after 'fraudulent' takeover reports sent shares of U.S. companies Harman International (HAR) and Textron (TXT) soaring. The SEC said the case represents 'pretty brazen misconduct,' with Al-Braikan aggressively buying Harman stock and call options in the four days before the fake tender offer, followed by a liquidation of the entire position.
• Qualcomm fined for abusing market power. South Korea’s fair trade regulator is fining Qualcomm (QCOM) a record $208M, accusing the U.S. chipmaker of abusing its market dominance. Qualcomm promised to fight the ruling, which it called 'overly excessive and unwarranted.' South Korean regulators have been investigating Qualcomm since 2006.
• Beijing Auto's Opel bid fails. Xu Heyi, chairman of Beijing Automotive, said the company's bid for General Motors' Opel unit failed because of a disagreement over the intellectual property rights to care designs and technology. Analysts speculate that Beijing Automotive's growing success may have been a factor as well, as "GM has no interest in strengthening a rival in China."
• Tough times for Microsoft. Microsoft (MSFT) reported quarterly earnings after the market closed (see details below), with a $0.02/share miss that dampened hopes of a tech recovery. The company posted its first ever annual decline in sales of its Windows operating system, and saw weak sales across all of its units, but struck a bullish tone, noting "there is some sense we have hit bottom."
• Amazon fails to amaze. Amazon (AMZN) met expectations when it reported quarterly earnings yesterday (see details below), but took a profit hit on a legal settlement and weak sales in high-margin products like videogames. Sales of media, including books and music, were flat in North America. On a more positive note, Amazon's third-party marketplace continued to grow, contributing 30% of unit sales.
• U.K. economy shrinks. The U.K. economy shrank far more than expected in Q2, contracting 0.8% from the previous quarter and 5.6% annually, the largest decline since quarterly records began in 1955. This was the fifth consecutive quarter of GDP contraction in the U.K.
• Jobless claims rise. Initial jobless claims came in at 554K, up 30K from a week ago (revised) and better than the 560K consensus. Continuing claims fell 88K to 6.225M.
• Fewer mass layoffs. Mass layoffs (of at least 50 people) fell 6% in June to 2,763, resulting in 279K job losses, down from record highs in May. Over the year, mass layoffs increased by 1,046 and associated initial claims increased by 104K.
• Home sales increase. Existing home sales rose 3.6% in June to 4.89M/year, vs. consensus of 4.77M. Sales are 0.2% lower than a year ago. NAR chief economist Lawrence Yun said he expects the gradual uptrend to continue, but noted again that new appraisal standards are resulting in lost sales.

Earnings: Friday Before Open

• Arch Coal (ACI): Q2 EPS of -$0.11 misses by $0.05. Revenue of $555M (-29.4%) vs. $634M. Full-year guidance in line. Believes the trough of the current coal market cycle has been reached, and anticipates better industry supply and demand balance in H2. Shares -2.8% premarket. (PR)
• Ashland (ASH): FQ3 EPS of $1.01 beats by $0.09. Revenue of $2.04B (-7.5%) in-line. (PR)
• Black & Decker (BDK): Q2 EPS of $0.63 beats by $0.26. Revenue of $1.19B (-27.4%) in-line. Sees Q3 EPS of $0.35-0.45 vs. $0.52 consensus and full-year EPS of $1.65-2.00 vs. $1.60. (PR)
• Dover (DOV): Q2 EPS of $0.54 beats by $0.08. Revenue of $1.4B (-30%) in-line. "Though quarterly order rates stabilized across most of our businesses, we still do not anticipate a meaningful second half recovery." (PR)
• Ericsson (ERIC): Q2 EPS of 0.26 kroner misses by 0.58 kroner. Revenue of 52.1B kroner vs. consensus of 50.58B. Gross margin 36.3% vs. 37% a year ago. Notes continued growth in mobile subscriptions, although the growth rate has slowed. Shares -6.6% in Stockholm. (PR)
• Exelon (EXC): Q2 EPS of $1.03 beats by $0.06. Revenue of $4.17B (-11.1%) vs. $4.93B. Sees Q3 EPS of $0.90-1.00 vs. $1.05 consensus. Shares -0.5%. (PR)
• Fortune Brands (FO): Q2 EPS of $0.70 beats by $0.06. Revenue of $1.74B (-16.9%) in-line. Sees full-year EPS in line with consensus. (PR)
• Ingersoll-Rand (IR): Q2 EPS of $0.50 beats by $0.11. Revenue of $3.47B (+12.8%) in-line. Sees Q3 EPS of $0.55-0.70 vs. consensus of $0.52 and full-year EPS of $1.39-1.69 vs. $1.32. "Based on our recent order pattern and a review of customer and channel activity, we expect to continue to see reduced activity levels year over year for most of our major end markets for the second half of 2009." (PR)
• Pinnacle Entertainment (PNK): Q2 EPS of $0.08 beats by $0.05. Revenue of $266M (flat). (PR)
• Schlumberger (SLB): Q2 EPS of $0.68 beats by $0.05. Revenue of $5.53B (-18.1%) in-line. Says "the overall sequential rate of revenue decline slowed as a further precipitous drop in North America was offset by slowing rates of decline and some recovery in other parts of the world." (PR)
• Sepracor (SEPR): Q2 EPS of $0.72 beats by $0.33. Revenue of $326M (+10.9%) vs. $280M. Sees full-year EPS of $2.55-2.90 vs. $2.54. (PR)
• T. Rowe Price Group (TROW): Q2 EPS of $0.38 beats by $0.04. Revenue of $442M (-24.6%) vs. $424M. "The second half of 2009 will likely continue to be challenging for both consumers and companies around the world; nevertheless, investors should be encouraged about the prospects for a gradual return to longer-term financial stability and global growth." (PR)
• Wabtec (WAB): Q2 EPS of $0.64 beats by $0.02. Revenue of $334M (-14.4%) vs. $380M. (PR)

Earnings: Thursday After Close

• Amazon.com (AMZN): Q2 EPS of $0.32 in-line. Revenue of $4.65B (+14%) vs. $4.69B. Sees Q3 revenue of $4.75B-5.25B vs. $4.92B. Sees operating income of $120M-210M. (PR)
• American Express (AXP): Q2 EPS ex-items of $0.27 beats by $0.01. Revenue of $6.1B (-18%) vs. $6.3B. Q2 provisions for losses $1.6B vs. year-ago $1.8B. Tier one risk-based capital ratio 9.6% at Q2 end. (PR)
• Ameriprise Financial (AMP): Q2 EPS of $0.58 in-line. Revenue of $1.9B (-5%) vs. $1.8B. (PR)
• Baidu.com (BIDU): Q2 adjusted EPS of $1.71 beats by $0.27. Revenue of $161M (+37%) vs. $158M. (PR)
• Broadcom (BRCM): Q2 EPS of $0.03 misses by $0.21. Revenue of $1B (-13%) in-line. (PR)
• Burlington Northern Santa Fe (BNI): Q2 EPS of $1.18 beats by $0.17. Revenue of $3.3B (-26%) vs. $3.4B. (PR)
• Bucyrus International (BUCY): Q2 EPS of $1.08 beats by $0.25. Revenue of $724M (+17%) vs. $625M. (PR)
• CA Inc. (CA): Q1 EPS of $0.42 beats by $0.04. Revenue of $1.05B (-3%) vs. $1.03B. Sees FY10 EPS of $1.60-1.70 vs. $1.57. Sees FY10 revenue growth high end of 2-4%. (PR)
• Cabot Oil & Gas (COG): Q2 EPS of $0.38 beats by $0.04. Revenue of $205M (-18%) vs. $206M. (PR)
• Capital One (COF): Q2 EPS of -$0.65 beats by $0.08. Revenue of $4.1B (+1%) vs. $3.9B. (PR)
• Century Aluminum Company (CENX): Q2 EPS of -$0.32 beats by $0.50. Revenue of $189M (-65%) vs. $188M. (PR)
• Cheesecake Factory (CAKE): Q2 EPS of $0.32 beats by $0.06. Revenue of $408M (flat) vs. $403M. Q2 same-store sales down 3.2%. (PR)
• Chubb (CB): Q3 EPS of $1.49 beats by $0.18. Net written premiums of $2.8B (-7%) vs. $3B. Sees FY09 EPS of $5.20-5.50 vs. $5.15. (PR)
• Compuware (CPWR): Q1 EPS of $0.22 beats by $0.09. Revenue of $214M (-28%) vs. $218M. (PR)
• Con-Way (CNW): Q2 EPS of $0.64 beats by $0.51. Revenue of $1.1B (-21%) in-line. (PR)
• Developers Diversified Realty (DDR): Q2 FFO of $0.51 beats by $0.01. Revenue of $204M (-8%) vs. $202M. (PR)
• Eastman Chemical Company (EMN): Q2 adjusted EPS of $0.86 beats by $0.15. Revenue of $1.3B (-32%) vs. $1.4B. Sees Q3 EPS of $1.10 vs. $0.82. Sees FY09 EPS high end of $2.00-$3.00 vs. $2.48. (PR)
• Federated Investors (FII): Q2 EPS of $0.52 beats by $0.02. Revenue of $307M (-1%) vs. $314M. Total managed assets $402B. (PR)
• Immucor (BLUD): Q4 EPS of $0.29 beats by $0.20. Revenue of $79M (+15%) vs. $75M. Sees FY10 EPS of $1.10-1.17 vs. $1.11. Sees FY10 revenue of $332M vs. $297M. (PR)
• Informatica (INFA): Q2 EPS of $0.13 misses by $0.06. Revenue of $117M (+3%) vs. $118M. (PR)
• IPC Holdings (IPCR): Q2 EPS of $1.72 beats by $0.36. Revenue of $195M (+240%) vs. $120M. (PR)
• Juniper Networks (JNPR): Q2 EPS of $0.19 beats by $0.01. Revenue of $786M (-11%) vs. $767M. (PR)
• KLA-Tencor (KLAC): Q4 EPS of -$0.15 in-line. Revenue of $282M (-52%) vs. $298M. (PR)
• Leggett & Platt (LEG): Q2 EPS of $0.16 beats by $0.02. Revenue of $757M (-29%) vs. $781M. Sees FY09 adjusted EPS of $0.55-0.70 vs. $0.64. Sees FY09 revenue of $3B vs. $3.1B. (PR)
• MEMC Electronic Materials (WFR): Q2 EPS of $0.03 beats by $0.03. Revenue of $283M (-47%) vs. $231M. (PR)
• Microsoft (MSFT): Q4 EPS of $0.34 misses by $0.02. Revenue of $13.1B (-17%) vs. $14.4B. (PR)
• Netflix (NFLX): Q2 EPS of $0.58 beats by $0.08. Revenue of $409M (+21%) vs. $410M. Sees Q3 EPS of $0.39-0.47 vs. $0.45. Sees Q3 revenue $416M-422M vs. $418M. Raises FY09 EPS guidance to $1.65-1.82 (from $1.56-1.72) vs. $1.72. Raises FY09 revenue view to $1.65B-1.67B (from $1.63B-1.67B) vs. $1.66B. (PR)
• PMC - Sierra (PMCS): Q2 EPS of $0.13 beats by $0.03. Revenue of $123M (-12%) vs. $120M. (PR)
• Rambus (RMBS): Q2 EPS of -$0.23 misses by $0.02. Revenue of $27M (-24%) in-line. (PR)
• RF Micro Devices (RFMD): Q1 EPS of $0.07 beats by $0.07. Revenue of $213M (-12%) vs. $187M. (PR)
• Riverbed Technology (RVBD): Q2 EPS of $0.14 in-line. Revenue of $91M (+12%) vs. $94M. (PR)
• Starent Networks (STAR): Q2 EPS of $0.20 beats by $0.03. Revenue of $78M (+28%) vs. $76M. (PR)
• SunPower (SPWRA): Q2 EPS of $0.24 beats by $0.10. Revenue of $298M (-22%) vs. $263M. Sees FY09 EPS of $1.15-$1.60 vs. $0.96. Sees FY09 revenue $1.35B-1.7B vs. $1.32B. Sees FY09 CapEx $250M-300M. (PR)
• Synovus Financial (SNV): Q2 EPS of -$1.82 misses by $1.28. Pretax income of $145M. (PR)
• Taubman Centers (TCO): Q2 FFO of $0.65 beats by $0.04. Revenue of $159M (flat) vs. $148M. (PR)
• Washington Real Estate Investment Trust (WRE): Q2 FFO of $0.53 beats by $0.03. Revenue of $77M (+12%) vs. $78M. (PR)

Today's Markets

Overseas markets posted modest to strong gains Friday. Futures are moderately higher in overnight trading.

• Asia: Nikkei +1.55% to 9,945. Hang Seng +0.83% to 19,983. Shanghai +1.33% to 3,373. BSE +0.97% to 15,379.
• Europe at midday: London +0.5%. Paris +0.4%. Frankfurt +0.4%.
• Futures at 7:00: Dow +0.3% to 9019. S&P +0.2% to 971. Nasdaq +0.1%.
  Crude +0.2% at $66.46. Gold -0.3% to $952.30.
  30-year Tsy bond +0.32% to 116-00. 10-year +0.18%. 5-year +0.1%. 2-year +0.04%.
  Euro +0.2% vs. dollar. Yen +0.3%. Pound -0.35%.

Friday's Economic Calendar

• 9:55 University of Michigan Consumer Sentiment
  10:30 Bernanke, Geithner, Bair testify on regulatory reform
• Notable earnings before Friday's open: ACI, ASH, BDK, DOV, ERIC, EXC, FO, IR, PNK, SEPR, SLB, TROW, WL

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[AndrewBaker]

Markets up on better than expected results!

When the results expected have been set so low, it's no wonder they get beaten; but that doesn't say the results are any good. Manipulative accounting is enabling many to suggest that they have not done as bad as they may have done. PE ratios are massaged in this way as well. Look at the real trading though and you can see that it is getting worse, not better. Do people really think that if they believe enough lies and buy enough stocks at unrealistically high prices that that will in some way trigger a revival in the economy and put us all back on track for a continuation of rising stock prices, more jobs, better homes, less taxes, longer vacations, shorter working hours, better and cheaper health care, improved education for our kids, cheap foreign holidays, a strong dollar ................... Wake up!! You're dreaming (and it's a nightmare even though you may not yet know it).

2009 Jul 24 07:43 AM

[doubleguns]

I agree Andrew!!

The higher that we go up on the second leg of a "W" recovery the worse the third leg down will be. I am very concerned that this is pure manipulation and momentum at this point. I want to see earnings and revenue growth together before I believe this is not going to come crashing back down later this fall or winter. I believe that the Christmas shopping season will let us know where America is heading but that is 4 months away.

I have trailing stops in on most of my positions.

2009 Jul 24 08:19 AM

[Old Trader]

Regarding the drop of 88k in the number of continuing unemployment claims, it was reported last week that in Pa. alone, the number of people whose unemployment benefits were exhausted (which would drop them from the rolls) was 25k. That's ONE state out of 50. I'd be very curious to see additional data from other states.

2009 Jul 24 08:32 AM

[mac123449]

The next bubble is alreading beginning only this time when it busts it won't be the .com bubble or the housing market but the United states federal gubbermints massive debt bubble that makes the other bubbles look like very small flies being swatted and squawsh by Obama and his giant printing press.

2009 Jul 24 09:06 AM

[absinop]

Earnings Season is here. An excellent chance to make some money. Below are few that I am moving into: Always remember Sell the Losers, Keep the Winners. Date shown is expected EA announcement time with relative-market indication.

7/27 bmo: GLW ANR TSN FCL
7/27 mrkt: JEC WPP
7/27 amc: ICO BWLD RCII
8/5

2009 Jul 24 09:19 AM

[JCCIII]

For what it's worth, Hazem Khalid Al-Braikan should be executed or, perhaps worse, fined to the tune of 3-10 times the amount he inappropriately profited from his illegal scheme. I suspect he will ignore the SEC lawsuit or bargain it down to a tolerable out-of-court fine. Any meaningful punishment will likely be the responsibility of our dubious ally, Kuwait. How Kuwait ends up treating Hazem Khalid Al-Braikan will be telling on how Kuwait really feels about the US; real ally and friend or oil customer to be exploited to maximum possible. Failure to properly punish will, like meaningful punishment, give a good indication of what Kuwait really thinks of the US, and failure to properly punish will encourage further similar shenanigans by other Kuwaiti rich guys.

2009 Jul 24 12:15 PM

[notsosmart]

ha ha.kuwait our ally?? LOL.realistically,after pushing phony rated AAA worthless paper all over the world we cant make too much noise about foreign crooks,swindlers & scoundrels.made-off functioned for years with sec blessings.the sec is useless.kuwait must be shaking in their desert boots.

2009 Jul 24 12:36 PM

[Gravity404]

The Office of the Comptroller of the Currency which is suppose to regulate banks, on the front lines, was asleep on the job.

So, let's give them more responsibility.

2009 Jul 24 02:08 PM

[Gravity404]

Ahhh, no, that would be France your describing.


On Jul 24 07:43 AM AndrewBaker wrote:

> Markets up on better than expected results!
>
> When the results expected have been set so low, it's no wonder they
> get beaten; but that doesn't say the results are any good. Manipulative
> accounting is enabling many to suggest that they have not done as
> bad as they may have done. PE ratios are massaged in this way as
> well. Look at the real trading though and you can see that it is
> getting worse, not better. Do people really think that if they believe
> enough lies and buy enough stocks at unrealistically high prices
> that that will in some way trigger a revival in the economy and put
> us all back on track for a continuation of rising stock prices, more
> jobs, better homes, less taxes, longer vacations, shorter working
> hours, better and cheaper health care, improved education for our
> kids, cheap foreign holidays, a strong dollar ...................
> Wake up!! You're dreaming (and it's a nightmare even though you may
> not yet know it).

2009 Jul 24 02:12 PM

[AndrewBaker]

Well, now I know we are not far from a correction. Looking at the thumbs down on my comments today, I see the bulls are coming back to the site. They think it is to gloat, but better players than them know that that is a leading indicator of a market peak, with a reversal just around the corner. It happened the last two times the market bounced and just before it turned down again. This site is not only good for checking out people and opinions, it's good for reversal signals too!

2009 Jul 24 03:35 PM

[Joseph Sherman]

Qualcomm fined for abusing market power -

Perhaps more executives and MBA graduates should take note of a recent Global Business Summit at Harvard where Daniel L. Vasella, Chairman and CEO, Novartis AG noted "Business leaders must use their personal moral compasses to make ethical decisions. As for the business’s compass, it should be oriented toward satisfying customers above all stakeholders. That is the orientation that allows for the greatest competitive success and profitability."

2009 Jul 24 04:33 PM

[WhoisJohnGalt]

Hi Rachel, I enjoy your summation of daily earnings, especially since it includes revenue changes and future guidance. However, has anyone noticed the discrepancy in numbers with what is provided on SA and Bloomberg? The actual earnings only vary by a cent or two sometimes, but the two sites disagree consistently on aggregate analyst expectations. I trust both sources, but clearly one has a more accurate source.

2009 Jul 24 05:07 PM

[437339]

READERS

Check out site 24hGOLD , Go to commentary column , far right , 3rd article down by Robert Chapman ,International Forecaster , is a MUST READ . He is one of top 4 International analysts .

2009 Jul 26 03:18 PM

[437339]

Re

Andrew , Double guns , old trader , notsosmart , you are all correct .I read JUST last week that year end 2009 , 1.5 million unemployed folks
unemployment benefits Will run out . Per Jim Sinclair , " we are in the eye of the storm ."

2009 Jul 26 03:39 PM

[DerekNJND]

you guys who keep talkin about the "W" or the "next leg down" really are missing out on some SERIOUS INVESTMENT INCOME!! sure, everyone has their longterm market thesis and outlook, the S&P being near 1000 in late July was certainly not in my forecast on Jan. 1. But after a while, you gotta trade what the market deals you. Otherwise, you COULD be saying the same things for 6 more months, then another year. I mean when will you bears stop talkin about the "next leg down?" or the last part of the Elliot Wave that started in 2008, the wave 5 selloff thats impending any second now?? There are plenty of ways to interpret corrections and elliot waves on a chart--but the worst thing you can do is dig your heels in waiting for a wave that the market simply skips or abbreviates.

Many could argue we are in wave 3 of a 5 wave uptrend, and that the S&P could approach 1100 by late summer. But if the market sells off and dips below 870, thus nullifying the pattern, am I going to dig my heels in and keep buying stocks?? LOL of course not, I wouldve adjusted my position long before then. So bears, I advise you to strongly rethink the facts instead of droning on and on about these corrections we are overdue for. I mean your theories are the same now as they were at SPX 700. Please, add recent history into your prognosis, and it will be more realistic. that "3rd leg down" looks like it morphed into more of a flat correction from January through early March, and broke out into a 5 wave uptick. I know, technically the wave 4 correction upwards wont nullify the pattern unless the SPX gets back up to Sept 08 levels, but even if it doesnt, you've wasted half a year speculating instead of making money

On Jul 24 08:19 AM doubleguns wrote:

> I agree Andrew!!
>
> The higher that we go up on the second leg of a "W" recovery the
> worse the third leg down will be. I am very concerned that this is
> pure manipulation and momentum at this point. I want to see earnings
> and revenue growth together before I believe this is not going to
> come crashing back down later this fall or winter. I believe that
> the Christmas shopping season will let us know where America is heading
> but that is 4 months away.
>
> I have trailing stops in on most of my positions.

2009 Jul 28 06:25 AM