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Wall Street Breakfast: Must-Know News

Feb 23 2010, 07:10 by: SA Editor Rachael Granby  |  includes: ACOR, AMZN, APD, ARG, AZN, BAC, BAM, BRCD, CBI, CTV, CVA, DIA, DTE, FST, GE, GGP, GLD, HAR, HD, HK, HMA, HP, HUM, INTC, JWN, MHS, MIL, MS, MSFT, NDAQ, NFLX, NYX, OHI, QQQ, RSH, RX, SCHW, SHLD, SPG, SPY, STT, TM, TMO, TXRH, UNH, USO, UTX, WMT, XNPT, ZLC

  • Health insurers relieved over Obama proposal. Obama unveiled his healthcare proposal, which includes a Medicare tax on capital gains and would cost $950B over 10 years. The proposal could put pressure on health insurers but those with significant Medicare plans, including Humana (HUM) and UnitedHealth (UNH), actually gained in yesterday's trading following a better-than-expected decision on government payment rates for private Medicare plans. If approved, the legislation could also put pressure on makers of generic and brand-name drugs, while device makers stand to gain.
  • Rakoff signs off on BofA settlement. Judge Jed Rakoff approved Bank of America's (BAC) $150M settlement with the SEC, bringing an end to civil charges that the bank misled shareholders when it acquired Merrill Lynch. However, Rakoff did so reluctantly, calling the revised settlement "half-baked justice at best." In particular, Rakoff was dismayed that the settlement calls for "very modest" punitive measures "that are neither directed at the specific individuals responsible for the nondisclosures nor appear likely to have more than a very modest impact on corporate practices or victim compensation." Rakoff's opinion leaves the bank vulnerable to similar charges by New York Attorney General Andrew Cuomo.
  • Toyota target of federal probe. Toyota (TM) disclosed yesterday that it is the subject of a criminal investigation by federal prosecutors, and the SEC was looking into what statements the company had made to shareholders. The developments came ahead of congressional hearings today and tomorrow that will take a closer look at Toyota's recalls and safety record. In an op-ed, Toyota President Akio Toyoda vowed to take the company back to basics, and to "set a new standard for transparency and speed of response on safety issues."
  • Simon gets competition for GGP. Brookfield Asset Management (BAM) is preparing to bid for a large stake of General Growth Properties (GGWPQ.PK), said sources close to the matter, and aims to beat the unsolicited bid made last week by Simon Property Group (SPG). Brookfield's bid would value GGP's equity at a little more than $3B, and would see GGP emerge from bankruptcy as a standalone company in which Brookfield is the largest shareholder. A bid could come as soon as this week, with sources calling it "a friendlier, more consensual deal from the General Growth point of view."
  • Thermo Fisher bids for rival. Thermo Fisher Scientific (TMO), the world's largest maker of lab instruments, has reportedly bid around $6B for rival Millipore (MIL) to expand its biotech business, sending shares of Millipore up more than 22% in yesterday's trading. A deal could be announced as early as next week.
  • Regulators ask State Street for fund info. State Street (STT) disclosed that federal securities regulators and federal prosecutors have asked it to supply information about some of its funds, including details in connection to its active fixed income strategies and its investments in sub-prime securities. The company said these funds were not covered by a settlement reached earlier this month with state and federal regulators.
  • Morgan Stanley ready to part with CICC stake. Morgan Stanley (MS) is reportedly close to selling its 34.3% stake in China International Capital Corp. to buy-out firms Kohlberg Kravis Roberts and TPG Capital for around $1B. Morgan Stanley invested $37M in the Chinese investment bank almost 15 years ago, and a sale would free it to pursue a joint venture with a local broker to trade stocks and other securities on the Chinese market.
  • Mulling changes to mortgage relief. The Treasury may institute new guidelines for mortgage lenders that would give distressed borrowers more time to qualify for a federal foreclosure-prevention program. The proposal would give borrowers 30 days to respond after being denied a modification of their loan terms under the Home Affordable Modification Program. During that time, borrowers could appeal the decision and lenders would be unable to put the home up for sale. A Treasury spokeswoman said the idea is being considered but hasn't been approved and no announcements are planned at present.
  • AstraZeneca settlement lifts outlook. This morning AstraZeneca (AZN) announced it will pay £505M ($783M) to settle a tax dispute with U.K. regulators. As a result, AstraZeneca is raising its 2010 outlook. It now expects core earnings per share of $5.90-6.30, up from $5.75-6.15. Shares +0.4% premarket (7:00 ET).
  • Apollo wants Zale stake. Private-equity firm Apollo Management is reportedly looking to buy a stake in Zale (ZLC), the jewelry chain that has been struggling with falling sales, sliding profits and mounting debt. Apollo's proposal is one of several Zale has received since it began examining its strategic options earlier this month, but Apollo's connections to the jeweler stretch back years which may give Apollo an advantage.
  • Hostile bid up in the air. After formally rejecting Air Products and Chemicals' (APD) hostile offer yesterday, Airgas (ARG) urged its shareholders to reject the $60/share tender as it substantially undervalues the company. Air Products said it plans to stick with its bid and will take "all necessary steps." Airgas investors have until April 9 to consider Air Products' offer.
  • Intel plans U.S.-only fund. Intel (INTC) is reportedly working with venture-capital firms to create a $2B fund that will invest only in U.S. companies. In a speech at the Brookings Institution later today, CEO Paul Otellini will talk about "the need to create a culture of investment in the United States," and may provide more details on the new fund.
  • United Tech okayed to buy GE arm. United Technologies (UTX) won approval from EU regulators to buy GE's (GE) security business. The $1.82B acquisition is expected to reinforce United Tech's earnings in 2011 and beyond.
  • Wal-Mart's movie voodoo power. Wal-Mart (WMT) agreed to buy start-up Vudu, an online movie service. Terms of the deal were not disclosed, though Wal-Mart is reportedly paying out more than $100M in cash, a price tag some find a bit high for a company that's not Netflix (NFLX).
  • Amazon, MSFT reach patent deal. Microsoft (MSFT) and Amazon (AMZN) reached a patent licensing agreement in which Amazon will be able to use Linux-based open-source software in its Kindle e-reader and servers. Microsoft will gain access to Amazon patents that it didn't identify. Terms of the deal were not disclosed.
  • Jobs bill moves forward. A $15B jobs bill passed a key procedural vote in the Senate by a margin of 62-30, paving the way for a final vote on the stripped-down bill in the next few days.
  • Harman's looking to buy. Harman (HAR) CEO Dinesh Paliwal said the company is in talks with potential acquisition targets in China, India and Brazil, and is looking to spend up to $200M in deals over the next 12-18 months.
  • Technical changes. 1) Oklahoma oil and gas driller Helmerich & Payne (HP) will replace IMS Health (RX) in the S&P 500 after Friday's close. 2) Charles Schwab (SCHW) is moving to the NYSE (NYX) from Nasdaq (NDAQ), effective March 5.

Earnings: Tuesday Before Open

  • Acorda Therapeutics (ACOR): Q4 EPS of -$0.59 in-line. Revenue of $14.44M (+15.9%) vs. $14.88M. (PR)
  • Home Depot (HD): Q4 EPS of $0.24 beats by $0.07. Revenue of $14.5B (-0.3%) vs. $14B. Shares +0.6% premarket. (PR)
  • Medco Health Solutions (MHS): Q4 EPS of $0.76 beats by $0.01. Revenue of $15.2B (+17.6%) vs. $15B. (PR)
  • Omega Healthcare Investors (OHI): Q4 EPS of $0.36 in-line. Revenue of $49.4M (+0.4%) vs. $43M. (PR)
  • Petrohawk Energy (HK): Q4 EPS of $0.12 misses by $0.03. Revenue of $355M (+31.1%) vs. $350M. (PR)
  • Sears (SHLD): Q4 EPS of $3.69 beats by $0.15. Revenue of $13.2B (-0.2%) vs. $12.9B. (PR)

Earnings: Monday After Close

  • Brocade Communications Systems (BRCD): FQ1 EPS of $0.19 beats by $0.04. Revenue of $540M (+25%) vs. $548M. Shares -13.9% AH. (PR, earnings call transcript)
  • Chicago Bridge Iron (CBI): Q4 EPS of $0.41 beats by $0.02. Revenue of $1.04B (-31.4%) vs. $1.05B. Guides FY10 EPS in-line, revenue below consensus. Shares -6.1% AH. (PR)
  • Commscope (CTV): Q4 EPS of $0.53, in-line. Revenue of $748M (-13.1%) vs. $764M. Guides Q1 revenue below consensus. Shares -4.8% AH. (PR, earnings call transcript)
  • Covanta (CVA): Q4 EPS of $0.18 misses by $0.05. Revenue of $407M (-2%) vs. $427M. Sees 2010 EPS of $0.55-0.75 vs. $0.87. Shares -3.4% AH. (PR)
  • DTE Energy (DTE): Q4 EPS of $0.72, in-line. Revenue of $2.12B (-2.3%) vs. $2.54B. Guides FY10 EPS in-line. Shares +0.9% AH. (PR)
  • Forest Oil (FST): Q4 EPS of $0.56 misses by $0.04. Revenue of $274M (-24%) vs. $256M. Shares -1.3% AH. (PR)
  • Health Management Associates (HMA): Q4 EPS of $0.12 in-line. Revenue of $1.2B (+10%) in-line. Shares +1.2% AH. (PR)
  • Nordstrom (JWN): Q4 EPS of $0.77 misses by $0.02. Revenue of $2.5B (+10%) in-line. Same-store sales up 6.9%; expects 2010 same-store sales to rise 2-4%. Shares -3.5% AH. (PR, earnings call transcript)
  • RadioShack (RSH): Q4 EPS of $0.60 beats by $0.01. Revenue of $1.3B (+5%) in-line. U.S. same-store sales up 6.1%. Shares -4.8% AH. (PR, earnings call transcript)
  • Texas Roadhouse (TXRH): Q4 EPS of $0.12 beats by $0.02. Revenue of $227M (-3.0%) vs. $222M. (PR)
  • XenoPort (XNPT): Q4 EPS of -$0.60, beats by 0.20. Revenue of $5.8M (-45.3%) vs. $2.4M. Shares +2.4% AH. (PR)

Today's Markets

  • In Asia, Nikkei -0.5% to 10352.1. Hang Seng +1.2% to 20623. Shanghai -0.7% to 2983. BSE +0.3% to 16286.
  • In Europe at midday, London -0.1% to 5344. Paris -0.5% to 3738. Frankfurt -0.9% to 5640.
  • Futures: Dow -0.33% to 10340. S&P -0.34% to 1104. Nasdaq -0.44%. Crude 0% to $82.08. Gold -0.26% to $1170.90.

Tuesday's Economic Calendar

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.


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