- Goldman fails to hit a homer. Goldman Sachs (GS) reported Q3 earnings that well exceeded analyst consensus, but shares are lower premarket (-2.6%) after the giant investment bank fell short of bullish whisper numbers, which were looking for EPS of up to $6.00/share (actual: $5.25). Investment banking income came in at $899M, 38% lower than a quarter ago. In a nod to critics, Goldman pared its compensation expenses: the firm estimates total Q3 compensation at $5.35B, which equates to 43.3% of net revenue, down from 48.3% last quater. CEO Lloyd Blankenfein sounded an optimistic note in a prepared statement, saying that "although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors."
- Brewer puts Central European Operations on tap. CVC Capital Partners, a private equity firm, will buy Anheuser-Busch InBev's (BUD) businesses in Central Europe and the Balkans in a deal valued at $2.23B. The sale is part of the firm's vow to pare debt and keep its investment-grade credit rating after InBev bought U.S. brewer Anheuser-Busch for $52B last year. CVC will buy regional beer brands and some more well-known ones, such as Staropramen. AB InBev stands to make up to an additional $800M based on CVC's return on its initial investment.
- Bonds are the real deal. Although the Dow sailed past 10,000 on Wednesday, bonds continue to steal the show. U.S. fixed-income funds have been a cash magnet this year – attracting 18 times more money than stocks in 2009, despite the Dow surging 53% after hitting a 12-year low in March. Americans are deploying money they put in money-market accounts during the credit crisis back into the markets. And there's more ammo on the sidelines: almost $3.45T remains in U.S. money-market accounts.
- Fed divided on recovery's strength. The Fed believes a U.S. economic recovery is underway, but is still unclear about how strong it will be or how inflation will come into play, according to last month's minutes from the Fed's interest-rate setting committee, released Wednesday. Officials differed, for instance, on how many mortgage-backed securities should be purchased to boost the economy. Some voting members wanted to increase the size of a $1.25T program aimed at driving down mortgage rates and supporting the housing market, while one dissenter said the recent improvement in the economic outlook could warrant a reduction in the Fed's maximum purchases.
- CalPERS launches kickback probe. CalPERS said it is investigating a possible "pay-to-play" scheme where placement agents may have taken kickbacks for securing investments from the California-based public pension fund – the largest in the nation. The probe comes after CalPERS found that former board member Alfred Villalobos, who runs placement-agent firm Arvco Capital Research, earned some $50M in fees for securing investments from CalPERS. The fund said it wants to ensure that the fees "did not come at our expense." Documents show that the bulk of fees was paid by Apollo Management, the New York private-equity firm run by billionaire investor Leon Black.
- Wasserstein's death sparks CEO search. Bruce Wasserstein, who had a hand in most major takeover battles in the 1980s, has died at 61 years of age – triggering a search to replace him as CEO at Lazard. The New York boutique banker named Steven J. Golub as interim chief executive. Though Golub is the front-runner for the job, sources say other contenders include Gary Parr and Terry Savage.
- Times hangs on to Boston Globe. New York Times (NYT) scrapped its plan to sell the Boston Globe, wagering it is better off trying to fix the unprofitable newspaper than accepting a paltry sum for it. In a memo to employees, chairman Arthur Sulzberger Jr. and CEO Janet Robinson wrote that the Globe "has significantly improved its financial footing by following the strategic plan it set out at the beginning of the year. All along, we explicitly recognized that a careful restructuring of the Globe was one possible route and, thanks to your hard work, that is precisely what has been done."
- Cadogan returns to buyout table. Cadogan Management, a $3.6B hedge-fund investing firm, will say today that it is buying back its business from Netherlands-based Fortis Bank for undisclosed terms, sources say. New York-based Cadogan will spin off from the European bank's U.S. asset-management arm when the management-led buyout closes. Cadogan, Fortis and French bank BNP Paribas announced earlier this year that they would buy a range of assets from Fortis. The founder and other top executives, who quit earlier this month when talks broke down, will return.
- Congress to investigate pay at bailout firms. Companies that received big taxpayer handouts under TARP are facing a Congressional probe over big executive compensation packages. Those in the crossfire include: AIG (AIG), Bank of America (BAC), Citigroup (C), Chrysler, Chrysler Financial and GMAC. In two weeks, Treasury pay czar Kenneth Feinberg will testify about pay practices before the House Oversight and Government Reform panel. Feinberg is urging AIG to reduce a portion of the $198M in incentives it claims it needed to keep crucial staffers.
- Redstone pares stake in Viacom, CBS. Scrambling to meet a looming debt payment, Sumner Redstone put some of his family's controlling stakes in Viacom (VIA) and CBS Corp. (CBS) on the block. The stakes are valued at as much as $947M, or more than a third of the value of the combined stake that the Redstone family holding company, National Amusements Inc., holds in the two media giants. The sale – spurred after Redstone failed to nab the right price for many of the family's movie theaters on the auction block – would still leave the mogul with voting control in both companies.
- NYSE faces off with new rivals. Young, fast-moving rivals are pushing their way into the New York Stock Exchange's public marketplace and creating private markets that critics say give big banks and investment funds an edge over ordinary investors. These upstarts, including dark pools, are invisible to regulators. The SEC is concerned and has been opening investigations, but such scrutiny won't make the Big Board's problems go away as it struggles to make its way as a for-profit corporation.
- Regulatory grip on derivatives eases. The House Financial Services Committee approved a provision that, according to Chairman Barney Frank, would exempt "the great majority" of businesses that use derivative instruments to hedge their business risks from trading such instruments through exchanges or clearinghouses. Critics have said the exemptions would create too large a loophole for financial instruments that were unregulated and played a central role in the economic crisis.
Earnings: Thur. Before Open
- Baxter (BAX): Q3 EPS of $0.98 beats by $0.01. Revenue of $3.15B (-0.2%) in-line. Shares -1% premarket. (PR)
- Citigroup (C): Q3 EPS of -$0.27 vs. consensus of -$0.38. Revenue of $20.4B vs. consensus of $20B. Allowances for loan losses up to $36.4B, or 5.9% of total loans. "While consumer credit trends are improving in international markets, the U.S. consumer credit environment remains challenging." Shares -3.4% premarket. (PR)
- Fairchild Semi (FCS): Q3 EPS of $0.12 beats by $0.05. Revenue of $332M (+19.4%) vs. $322M. Sees Q4 revenue of $333-343M vs. consensus of $328M, and margin of 28-30% vs. 27.5%. Shares -1.2% premarket. (PR)
- Goldman Sachs (GS): Q3 EPS of $5.25 beats by $1.01. Revenue of $12.37B (-10.1%) vs. $11.02B. (PR)
- Nokia (NOK): Q3 EPS of €0.17 beats by €0.03, but Q3 EPS including a surprise €908M goodwill writedown at its networks unit (due to "challenging market conditions") of -€0.15 misses by €0.29. Net sales of €9.8B (-19.8%) vs. €9.95B consensus. Shipped 108.5M phones vs. 107.2M consensus. Avg. phone price of €62 in line. Shares -3.5% premarket. (PR, Reuters)
- Southwest Airlines (LUV): Q3 EPS of $0.03 beats by $0.01. Revenue of $2.67B (-7.8%) in-line. Says passenger traffic was up 5% even as capacity was trimmed by 6%. (PR)
- Winnebago Industries (WGO): FQ4 EPS of -$0.19 beats by $0.05. Revenue of $59.5M (-30.2%) vs. $65.1M. (PR)
Earnings: Wed. After Close
- AptarGroup (ATR): Q3 EPS of $0.48 beats by $0.01. Revenue of $474M (-11%) vs. $466M. Shares -3.1% AH. (PR)
- Crown Holdings (CCK): Q3 EPS of $0.81 beats by $0.01. Revenue of $2.28B (-4%) vs. $2.34B. Shares -3.8% AH. (PR)
- Landstar System (LSTR): FQ3 EPS of $0.39 beats by $0.01. Revenue of $501M (-32%) vs. $511M. Shares +0.75% AH. (PR)
- Spartan Stores (SPTN): FQ2 EPS of $0.47 beats by $0.01. Revenue of $610M (-3%) vs. $622M. Shares -2.5% AH. (PR)
- Stanley Furniture Company (STLY): Q3 EPS of -$0.49 misses by $0.16. Revenue of $38.5M (-29%) vs. $40M. (PR)
- WD-40 Company (WDFC): FQ4 EPS of $0.46 beats by $0.06. Revenue of $78M (+1%) vs. $72M. Sees full-year EPS of $1.80-1.95 vs. $1.74. Shares +5.4% AH. (PR)
- Xilinx (XLNX): FQ2 EPS of $0.23 beats by $0.01. Revenue of $415M (-14%) vs. $410M. Sees Q3 revenue up 6-10% sequentially. Shares -0.1% AH. (PR)
Asia markets posted modest gains Thursday. Europe is flat at midday, as are U.S. stock futures after a tight overnight session.
- Asia: Nikkei +1.77% to 10,239. Hang Seng +0.51% to 21,999. Shanghai +0.31% to 2,980. BSE -0.21% to 17,195.
- Europe at midday: London -0.15%. Paris +0.1%. Frankfurt flat.
- Futures: Dow +0.1% at 9961. S&P +0.1% to 1088.50. Nasdaq flat. Crude +0.3% to $75.36. Gold -0.8% to $1,056. 30-year bonds -0.79%. 10-year -0.26%. 5-year -0.05%. Euro +0.1% vs. dollar. Yen -0.7%. Pound +1.9%.
Thursday's Economic Calendar
- 8:30 Jobless Claims
8:30 Empire State Mfg Survey
8:30 MAPI quarterly business outlook
10:00 Philly Fed business outlook
10:30 Natural gas inventory
11:00 Petroleum Inventories
4:15 PM Geithner: Q&A
6:00 PM Volcker: The Financial Crisis in Perspective
- Notable pre-market earnings: APH, BAX, SCHW, C, CY, FCS, GS, HOG, LUV, MNI, NOK, OMTR, PPG, SWY, WGO
- Notable post-market earnings: AMD, GOOG, IBM, PBCT, PLCM, TPX
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