Wall Street Breakfast: Must-Know News

• AOL goes solo. Time Warner (TWX) filed with the SEC to officially turn AOL into a stand-alone, publicly traded company called AOL Inc. According to the filing, Time Warner repurchased Google's (GOOG) 5% stake in AOL for $283M earlier this month, valuing AOL at less than $5.66B vs. the $20B implied valuation the business carried in 2005.
• Speculators drove oil price spike. The Commodity Futures Trading Commission will release a report next month suggesting speculators played a major role in causing oil prices to spike, reversing an earlier finding by the CFTC that attributed oil price swings primarily to supply and demand. One of the CFTC commissioners said the original analysis was based on 'deeply flawed data.' The agency, which is shifting away from its former hands-off approach, is expected to institute rules limiting the investments of large institutions in commodities.
• AIG keeps asset sale proceeds. AIG (AIG) used $2.4B from recent asset sales to improve the capital position of its property-casualty unit rather than using the funds to pay down some of its government debt. AIG's need to use some of the sale proceeds to bolster its own businesses will undoubtedly raise questions about the insurer's ability to repay its government bailout.
• U.S. pledges to rein in deficit. At the beginning of a strategic round of talks with China, Geithner pledged to ensure a 'sustainable' U.S. budget deficit by 2013 as Chinese officials expressed concern over the security of their U.S. financial holdings. There were few signs of tensions over the value of the yuan. Both countries agreed not to prematurely withdraw economic stimulus measures.
• SEC updates short-selling rules. The SEC will no longer require institutional investors to report their short-sale positions on a weekly and confidential basis, part of an effort to curb abuse by making more information about short positions available to the public. The weekly reporting was instituted in October as an emergency measure and will expire August 1. A temporary ban on naked short selling was made permanent.
• Amgen, Glaxo reach drug agreement. Amgen (AMGN) and GlaxoSmithKline (GSK) reached an agreement to jointly market denosumab, an osteoperosis treatment that could see annual sales of $2B within a decade if approved by regulators. Glaxo will pay $120M for near-term milestones to share profits in Europe and to sell the drug in countries where Amgen doesn't have any exposure. Amgen will market the drug in the U.S. and Canada, and retain the rights to sell it for cancer in Europe once it's approved.
• Third time's the charm for Delphi. Delphi looks set to emerge from nearly four years of bankruptcy protection with its third attempt at an exit plan. Delphi's board approved an offer to split the company between former parent General Motors and lenders, replacing an agreement announced two months ago between GM and Platinum Equity. Under the new deal terms, lenders will forgive $3.4B in debt in exchange for most of the supplier's assets, and the lenders will pay cash to keep Delphi operating. GM will pay a little over $3B for four North American factories and Delphi's steering business.
• BoA to shutter branches. Bank of America (BAC) is planning to slash the company's 6,100-branch network by 10%, reversing two decades of coast-to-coast expansion. Bank officials reportedly attribute the closings to changes in customer preferences, citing the shift away from traditional branches in favor of online and mobile banking. A timeline for the closures wasn't specified.
• Reining in derivatives. Lawmakers are considering steps to curb speculation in the $39T credit default swaps [CDS] market, which could include preventing investors from speculating on a borrower's credit quality. Among the options under consideration to curb speculation are a ban on naked CDS and a requirement that derivative dealers and investment advisers managing more than $100M report their short interests in CDS contracts to the appropriate regulator.
• Magna improves bid. Magna International (MGA) reportedly improved its bid for General Motors' Opel unit, offering to inject €350M upfront vs. an earlier offer of €100M. The improved offer comes after the German government criticized all three bidders for the amount of their own capital they were willing to inject into Opel.
• CVC brews up AB InBev bid. According to media reports, private equity group CVC Capital Partners is prepared to pay up to €1.5B ($2.1B) for the Central and Eastern European assets of Anheuser-Busch InBev. AB InBev was accepting bids until yesterday, by which point CVC and TPG Capital were still in the running but KKR had dropped out.
• New homes sales (.pdf). New home sales came in at 384K in June, up 11% from May, vs. consensus of 350K. Sales were down 21.3% vs. the previous year. The median home price of $206,200 was down from May's $221,600. Inventory of 281K homes represents an 8.8 month supply, down from 10.2 months in May.

Earnings: Tuesday Before Open

• AMB Property (AMB): Q2 EPS of $0.37 beats by $0.01. Revenue of $147M (-27%) vs. $144M.
• BE Aerospace (BEAV): Q2 EPS of $0.39 beats by $0.05. Revenue of $475M (-9%) vs. $488M. (PR)
• BP (BP): Q2 EPS of $1.01 beats by $0.09. Revenue of $54.8B (-50%) vs. $64B. Shares -1.2% premarket (6:50 ET). (BP press release (.pdf))
• Celanese (CE): Q2 EPS of $0.53 beats by $0.07. Revenue of $1.2B (-33%) vs. $1.3B. (PR)
• Check Point Software (CHKP): Q2 EPS of $0.48 beats by $0.02. Revenue of $224M (+12%) vs. $220M. (PR)
• Coach (COH): FQ4 EPS of $0.43 in-line. Revenue of $778M (-0.5%) vs. $780M. (PR)
• Coventry Health Care (CVH): Q2 EPS of $0.50 beats by $0.10. Revenue of $3.5B (+19%) in-line. (PR)
• Diamondrock Hospitality Company (DRH): Q2 EPS of $0.24 beats by $0.03. Revenue of $144M (-21%) vs. $145M. (PR)
• EarthLink (ELNK): Q2 EPS of $0.29 beats by $0.03. Revenue of $186M (-24%) in-line. (PR)
• Energizer (ENR): Q2 EPS of $1.12 beats by $0.09. Revenue of $997.5M (-6.5%) vs. $1B. (PR)
• FPL Group (FPL): Q2 EPS of $0.99 beats by $0.01. Revenue of $3.8B (+6%) vs. $3.9B. (PR)
• Interpublic Group of Companies (IPG): Q2 EPS of $0.04 misses by $0.06. Revenue of $1.5B (-20%) vs. $1.6B. (PR)
• Jacobs Engineering Group (JEC): FQ3 EPS of $0.76 beats by $0.01. Revenue of $2.7B (-7%) vs. $2.8B. (PR)
• McGraw-Hill Companies (MHP): Q2 EPS of $0.58 beats by $0.03. Revenue of $1.46B (-12%) vs. $1.54B. (PR)
• National Oilwell Varco (NOV): Q2 EPS of $0.90 beats by $0.03. Revenue of $3B (-9.5%) vs. $3.1B. Shares -2.7% premarket (8:10 ET). (PR)
• Office Depot (ODP): Q2 EPS of -$0.22 misses by $0.10. Revenue of $2.8B (-22%) vs. $2.9B. (PR)
• PACCAR (PCAR): Q2 EPS of $0.07 vs. consensus of $0.04 (may not be comparable). Revenue of $1.6B (-58%) vs. $1.7B. Shares +0.9% premarket (8:30 ET). (PR)
• Patriot Coal Corporation (PCX): Q2 EPS of $0.39 vs. consensus of -$0.47 (may not be comparable). Revenue of $507M (+49.3%) vs. $518M. (PR)
• PepsiAmericas(PAS): Q2 EPS of $0.74 beats by $0.06. Revenue of $1.3B (-6%) in-line. (PR)
• Rockwell Automation (ROK): FQ3 EPS of $0.23 beats by $0.03. Revenue of $1B (-31.5%) in-line. (PR)
• Smith International (SII): Q2 EPS of $0.15 misses by $0.06. Revenue of $1.9B (-22%) vs. $2B. (PR)
• SUPERVALU (SVU): Q2 EPS of $0.55 beats by $0.02. Revenue of $12.7B (-5%) vs. $12.8B. (PR)
• Teva Pharmaceutical Industries (TEVA): Q2 EPS of $0.83 beats by $0.03. Revenue of $3.4B (+20%) vs. $3.5B. (PR)
• Textron (TXT): Q2 EPS of $0.08 beats by $0.11. Revenue of $2.6B (-29%) in-line. Lowers guidance for FY '09, sees EPS of $0.33-0.63 vs. prior $0.45-0.75, sees FY '09 revenue of ~$10.6B vs. prior $11B. (PR)
• United States Steel Corporation (X): Q2 EPS of -$3.28 beats by $0.17. Revenue of $2.1B (-68.5%) vs. $2.4B. Shares -3.7% premarket (8:30 ET). (PR)
• Valero Energy (VLO): Q2 EPS of -$0.48 beats by $0.02. Revenue of $17.9B vs. $16.3B. Shares -2% premarket (8:15 ET). (PR)
• Viacom (VIA.B): Q2 EPS of $0.49 beats by $0.01. Revenue of $3.3B (-14.5%) vs. $3.5B. (PR)
• Vishay Intertechnology (VSH): Q2 EPS of -$0.10 misses by $0.02. Revenue of $460M (-41%) vs. $459M. Issues upside guidance for Q3, sees revenue of $480-520M vs. $477M consensus. (PR)
• Waddell & Reed Financial (WDR): Q2 EPS of $0.28 beats by $0.03. Revenue of $200M (-21%) vs. $195M. (PR)
• Waters (WAT): Q2 EPS of $0.78 misses by $0.01. Revenue of $363M (-9%) vs. $366M. (PR)

Earnings: Monday After Close

• ACE Limited (ACE): Q2 EPS of $2.09 beats by $0.15. Net premiums written of $3.4B (-5%). (PR)
• Amgen (AMGN): Q2 EPS of $1.29 beats by $0.13. Revenue of $3.7B (-1%) vs. $3.6B. Raises full-year EPS guidance to $4.80-4.95 vs. $4.57. (PR)
• CF Industries (CF): Q2 EPS of $4.33 beats by $1.72. Revenue of $991M (-15%) vs. $764M. (PR)
• Crane Company (CR): Q2 EPS of $0.47 misses by $0.02. Revenue of $545M (-21%) vs. $588M. (PR)
• Desarrolladora Homex (HXM): Q2 EPS of $0.91 beats by $0.24. Revenue of $359M (+8%) vs. $329M. (PR)
• Fidelity National Financial (FNF): Q2 EPS of $0.40 beats by $0.01. Revenue of $1.6B (+34%) in-line. (PR)
• Health Management Associates (HMA): Q2 EPS of $0.13 beats by $0.03. Revenue of $1.2B (+5%) vs. $1.1B. (PR)
• Hexcel (HXL): Q2 EPS of $0.18 misses by $0.01. Revenue of $277M (-23%) vs. $302M. (PR)

• Kilroy Realty (KRC): Q2 FFO of $0.79 beats by $0.09. Revenue of $71M (+2%) vs. $66M. (PR)

• Manitowoc (MTW): Q2 EPS of $0.19 beats by $0.06. Revenue of $1B (-13%) vs. $1.1B. (PR)
• Masco (MAS): Q2 EPS of $0.15 beats by $0.16. Revenue of $2B (-23%) in-line. Sees full-year revenue down 18-22%. (PR)
• Meritage (MTH): Q2 EPS of -$2.37 misses by $1.65. Revenue of $220M (-41%) vs. $211M. (PR)
• Olin (OLN): Q2 EPS of $0.36 beats by $0.03. Revenue of $383M (-11%) vs. $382M. (PR)
• Owens & Minor (OMI): Q2 EPS of $0.57 misses by $0.06. Revenue of $2B (+12%) in-line. (PR)
• Plum Creek Timber (PCL): Q2 EPS of $0.19 beats by $0.17. Revenue of $272M (-28%) vs. $227M. Sees Q3 EPS of $0.05-0.10 vs. $0.14. (PR)
• Rent-A-Center (RCII): Q2 EPS of $0.61 beats by $0.08. Revenue of $680M (-5%) vs. $684M. (PR)
• SL Green Realty (SLG): Q2 FFO of $1.20 misses by $0.01. Revenue of $253M (-13%) vs. $216M. (PR)
• Torchmark (TMK): Q2 EPS of $1.53 beats by $0.03. Net operating income of $126M (-3%); NOI/share $1.53 (+6%). (PR)
• Transatlantic (TRH): Q2 EPS of $1.68 beats by $0.07. Net premiums written of $1B (+2%) in-line. (PR)
• W.R. Berkley (WRB): Q2 EPS of $0.59 in-line. Revenue of $1.16B (-4%) in-line. (PR)

Today's Markets

Asian markets closed mixed. European markets and U.S. futures get off to a tepid start.

• In Asia, Nikkei -0.01% to 10,087. Hang Seng +1.8% to 20,625. Shanghai +0.1% to 3,438. BSE -0.3% to 15,332.
• In Europe at midday, London -0.2%. Paris flat. Frankfurt -0.1%.
• Futures: Dow -0.3%. S&P -0.4%. Nasdaq -0.3%. Crude -0.04% to $68.35. Gold +0.1% to $954.50.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  9:00 S&P/Case-Shiller Home Price Index
  10:00 Consumer Confidence
  10:00 Fed's Yellen speaks on the economic outlook
  10:00 State Street Investor Confidence Index
  10:00 Richmond Fed's Manufacturing Index
  5:00 PM ABC Consumer Confidence Index
  7:00 PM Geithner speaks at the National Committee on U.S.-China Relations Dinner
• Notable earnings before Tuesday's open: AMB, BEAV, BP, CE, CHKP, COH, CVH, DRH, ECL, ELNK, ENR, FPL, IPG, JEC, MHP, NOV, ODP, PCAR, PCX, ROK, SII, SVU, TEVA, TXT, VIA.B, VLO, VSH, WAT, WDR, X
• Notable earnings after Tuesday's close: BDN, CBI, EQ, FIS, FTI, HTZ, IDTI, LIFE, MCK, MEE, NLC, NSC, PMTC, PSYS, SBAC, SPN, STM, STR, TE, THQI, TSS, WDC, XL

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[Avooch:]

Rachel,

Big news today is GE Capital releasing details on its portfolio. GE is doing a fine job of trying to present as much information as possible.

This will not effect the markets in any dramatic fashion (ie a 3% swing) - However, these details will effect 'Animal Spirits' for the next quarter.

----------------------...

Don't Get Massacred !

gudovac1941.blogspot.com/
--------------

Jul 28 08:18 AM

[AndrewBaker:]

It seems now that the fate of the world economy going forward depends as much on China as it does the US. Given that China has such large dollar holdings and needs exports to the US and western countries to provide the required internal growth, as it is not yet sufficiently self-sustainable, there is a mutual financial symbiosis that requires improved economic circumstances in the US to keep China and other emerging markets in a growth pattern.

In short, we have to pat each others' backs and help each other along: one country cannot do it alone. Given that US finances are still not anywhere near improving, I suggest that when US markets fall back, which could be delayed until after the end of summer vacation time, the emerging economies will do so also. When these economies fall, especially China, they tend to do so very quickly and in greater numbers; so keep watching those overseas investments that you have to make up for a weak dollar. And be sure to be first out when the time comes: there will be some fast movement of funds home then.

Jul 28 08:21 AM

[Billy Ford:]

New home sales came in at 384K in June, up 11% from May, vs. consensus of 350K. Sales were down 21.3% vs. the previous year. The median home price of $206,200 was down from May's $221,600.

Does anyone else see the problem with this statement. Up 11% vs consensus!! Who cares about consensus!!! This is the same magic show that corporations are trying to pull..We beat the street..YYAAAYY!...oh, by the way (in fine print) we are down 50% YOY...give me a break..Im surprised wall street is buying into all this BS

Jul 28 08:36 AM

[robert.b.fe...:]

Wow. Oil speculators drove a that huge irrational spike! Ya think? Baltic index has ticked up meaning that dry shippers are doing OK but more importantly it shows that goods and raw materials are starting to move at a higher velocity. I'm not saying it's time for wine and roses but that things may be starting to look up just a bit.

Jul 28 08:48 AM

[absinop:]

7/28/09A. Earnings season is a great opportunity to earn some money. I'm taking a position in the following stocks. Their earnings announcements are scheduled at the market period indicated. But please remember: Sell the Losers, Keep the Winners.

7/29 before mrkt. opens: WPI GLBC
7/29 after mrkt. opens: AKAM
7/29 after mrkt. closes: SQNM QCOR TIS RYL

Jul 28 08:59 AM

[David White:]

Vickers Weekly Insider Report reported Monday that the ratio of insider selling to buying last week was 4.16 to 1 (the highest the ratio has been since Oct. 2007). The more stable 8-week average was 2.69 to 1 (the highest since Nov. 2007).

Of course, insiders are sometimes early, and occaisionally they are wrong. Still this does make one think that the current market rally may be facing strong headwinds in the near future.

If you combine this with the news from BofA that they are now planning the closure of 10% of their branch offices, you get an ugly picture.

Jul 28 09:08 AM

[ScroogeMcduck:]

hmmm. AKAM this does look like a nice trade on earnings

On Jul 28 08:59 AM absinop wrote:

> 7/28/09A. Earnings season is a great opportunity to earn some money.
> I'm taking a position in the following stocks. Their earnings announcements
> are scheduled at the market period indicated. But please remember:
> Sell the Losers, Keep the Winners.
>
> 7/29 before mrkt. opens: WPI GLBC
> 7/29 after mrkt. opens: AKAM
> 7/29 after mrkt. closes: SQNM QCOR TIS RYL

Jul 28 09:17 AM

[Perry B:]

Is anyone else bothered that the SEC is giving the institutions the protection of not disclosing short positions? This smacks of more market manipulation. With erratic daily charts. Aimed at picking off retail traders stops. Bringback the uptick rule. Quit protecting failing companies and let the free market decide who wins or loses.

Jul 28 10:05 AM

[robert.b.fe...:]

Amen. Reinstate Glass/Steagull as well and we will have a winner.


On Jul 28 10:05 AM Perry B wrote:

> Is anyone else bothered that the SEC is giving the institutions the
> protection of not disclosing short positions? This smacks of more
> market manipulation. With erratic daily charts. Aimed at picking
> off retail traders stops. Bringback the uptick rule. Quit protecting
> failing companies and let the free market decide who wins or loses.

Jul 28 10:22 AM

[bbowen7:]

Whatever happened to the regulatory reform movement?

Jul 28 11:00 AM

[David White:]

The SEC made the rule against naked short selling permanent today. It was set to expire on July 31. This should keep the markets from going down quite so quickly when they retrace. This means that brokers have to have (or buy) stock that they are lending for short selling.

We are still in a very volatile time.

Jul 28 11:22 AM

[Boxed Merlot:]

U.S. pledges to rein in deficit. At the beginning of a strategic round of talks with China, Geithner pledged to ensure a 'sustainable' U.S. budget deficit by 2013

“…we are committed to taking measures to… reducing the federal deficit to a sustainable level by 2013," Geithner said.


In other words, the federal deficit is currently out of control and nothing will / can be done until the next administration arrives, or “Never Change today what you can put off til tomorrow.”

Jul 28 02:34 PM

[PainfullyAware:]

If China Believes That The Clowns In Washington Are Going To "Rein In Their Spending" then they deserve what "Word And Assurances", with no accountability, brings.

At What Point In The Fiat Money History Of The US Has This Occurred?

Actions Are Different From Intentions. Both are "Talking Publicly" and "Acting Privately"; Each To Their Own Agenda And Perceived Threats.

Jul 28 03:04 PM

[mlp investor:]

it's up 11% from May, not from streets consensus. 3'rd up month.
the lower sales level/recession is appropriately reflected in financial and real asset prices this year vs.last


On Jul 28 08:36 AM futurestrader wrote:

> New home sales came in at 384K in June, up 11% from May, vs. consensus
> of 350K. Sales were down 21.3% vs. the previous year. The median
> home price of $206,200 was down from May's $221,600.
>
> Does anyone else see the problem with this statement. Up 11% vs
> consensus!! Who cares about consensus!!! This is the same magic show
> that corporations are trying to pull..We beat the street..YYAAAYY!...oh,
> by the way (in fine print) we are down 50% YOY...give me a break..Im
> surprised wall street is buying into all this BS

Jul 28 03:08 PM

[White Shield:]

"US pledges to rein in deficits" - LOL! Of course they will.

"Geithner, in his opening remarks, reiterated the U.S. call for China to shift toward relying on domestic demand for growth rather than exports."

Translation: Get past the model that made you (economically) great and create a "service based economy" - LIKE US!!!

What a shill? Nothing like taking financial advice from penniless bums...

Jul 29 09:55 AM