Wall Street Breakfast: Must-Know News

by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Shell warns of plunge in profits. Shell (NYSE:RDS.A) has warned that it expects its Q4 profit to be "significantly lower than recent levels of profitability," with the company estimating that adjusted earnings on a current cost of supplies basis will plummet to $2.9B from $7.3B a year earlier. Consensus is for $4B. Shell cited oil and gas prices, "weak industry conditions in downstream oil products, higher exploration expenses, and lower upstream volumes" as reasons for the drop in earnings. Shell's shares were -2.3% premarket.

Intel shares tumble despite earnings growth. Intel's (NASDAQ:INTC) Q4 net profit rose 6.4% to $2.63B as revenue increased 2.6% to $13.83B and topped forecasts, although EPS of $0.51 missed consensus by a penny. Intel reported that it "saw the (PC) market stabilize in the back half" of 2013, and sales at the PC CPU division were flat in Q4, while operating profit rose 20%. However, Intel's shares dropped 4.3% premarket, with investors concerned about lukewarm guidance and comments that the company overestimated the scope of a rebound in investment by its data-center clients.

Treasury cuts Ally stake to below 50% with $3B deal. The Treasury has sold $3B worth of shares in Ally Financial in a private placement to unnamed institutional investors, reducing its stake to 37% from 64%. With the deal, the government will have recovered $15.3B of the $17.2B bailout it provided the financing arm of General Motors (NYSE:GM) during the financial crisis. Ally now might pursue "a public offering, private sale of its common shares, or other alternatives."

Top Stock News
Apple iPhone goes on sale at China Mobile. Apple (NASDAQ:AAPL) has finally launched the iPhone on China Mobile's (NYSE:CHL) network, but despite the carrier's 763M subscribers, skepticism exists about how much the companies will benefit. "You need to consider the cannibalization of (iPhone) sales from China Unicom (NYSE:CHU), China Telecom (NYSE:CHA) and the grey market," says Gartner analyst CK Lu. "So even though there's an addition from China Mobile, it will also impact sales from other channels." As for China Mobile, there are concerns that it might get dragged into a subsidies war.

American Express profit doubles. American Express' (NYSE:AXP) Q4 net profit doubled to $1.31B and adjusted EPS of $1.25 was in line with consensus, as were sales, which rose 5% to $8.5B. "Fourth-quarter results reflected a healthy increase in billed business in the U.S. and internationally," CEO Kenneth Chenault said, adding that "card member spending (was) up 8% despite mixed reports during the holiday shopping season." Shares fell 0.4% in AH trading.

WSJ: Sprint sees T-Mobile value at $31B. Sprint (NYSE:S) has "received proposals from at least two banks" for financing a bid for T-Mobile USA (NASDAQ:TMUS), the WSJ reports, adding that Sprint will look to value T-Mobile's equity at $31B vs the latter's market cap of $26B. Other than financing, Sprint would have to persuade Deutsche Telekom (OTCQX:DTEGY, OTCQX:DTEGF) to sell its 67% stake in T-Mobile and the U.S. operator would possibly have to fight off any competing offer from Dish (NASDAQ:DISH). Sprint would need to win antitrust blessing as well.

Nintendo projects FY loss in dramatic reversal of outlook. Following a poor holiday season, Nintendo (OTCPK:NTDOF) has warned that it expects an operating loss of ¥35B ($336M) for the fiscal year through March instead of a profit of ¥100B, as the company had previously forecast. Nintendo has also slashed its estimates for revenues and for sales of its Wii U and 3DS gaming consoles. Nintendo's travails might have something to do with the success of Sony's (NYSE:SNE) PlayStation 4 and Microsoft's (NASDAQ:MSFT) Xbox One, both of which were launched in the run up to Christmas.

IBM to spend $1.2B+ on ramping up cloud offerings. IBM (NYSE:IBM) intends to invest over $1.2B on up to 15 new data centers across the world as part of its strategy to expand its cloud services. The plan will bring the number of centers that IBM operates to 40 and will double the capacity of SoftLayer, which rents online storage space to companies. Since IBM acquired the Dallas-based firm for $2B last year, it has gained 2,400 new clients.

Top Economic & Other News
U.K. retail sales unexpectedly jump in December. U.K. retail sales rose at the fastest pace in nine years in December, climbing 5.3% on year vs +1.8% in November and blowing past consensus of +2.6%. The data is in marked contrast to the difficult holiday season for major retailers such as Debenhams, Tesco and Marks & Spencer. It seem that smaller shops fared much better than their larger rivals.

Senate approves budget. The Senate has voted by 72-26 to approve the $1.01T budget to finance the government through September 30 even though most legislators haven't read the 1,582-page bill. With the House having passed the measures earlier this week, it will go to President Obama for his signature. Congress now has around six weeks to lift or suspend the $16.7T debt limit.

Canada tells U.S. to make a decision on Keystone. Canada appears to be losing patience with U.S. foot dragging over the Keystone XL pipeline, with Canadian Foreign Minister John Baird saying that his country wants a decision on the project - even a negative one - sooner rather than later. It appears to mark the first time a senior Canadian official has directly criticized Washington on the topic. "We can’t continue in this state of limbo," Baird said.

Top Ideas: Movers and Great Calls
1) On Tuesday, Alpha Gen Capital highlighted HickoryTech (OTCPK:HTCO) as a transitioning regional telecom destined for growth and a potential takeover target based on growth in its fiber and data segment. The stock is +24.9% since. Read article »
2) Trading the Spread called out railcar maker The Greenbriar Companies (NYSE:GBX) on August 13, citing it as an undervalued play on the American energy boom. Shares are +59.2% to date. Read article »

Top Ideas To Watch
1) Buysider Reid D. Notes raises questions about accounting practices at IT provider CGI Group (NYSE:GIB) in making the short case against the lead contractor of the healthcare.gov Web site. Read article »
2) Another buysider sees a short opportunity, with Terry Lally projecting a 55% downside at medical-software provider Healthstream (NASDAQ:HSTM) as revenue growth decelerates and the company's SaaS-like multiple compresses. Read article »

Top Ideas are the best long and short ideas on Seeking Alpha. SA PRO subscribers receive early access to these Top Ideas, which often move markets. For more information about SA PRO and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan -0.1% to 15734. Hong Kong +0.6% to 23133. China -0.9% to 2005. India -0.95% to 21063.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt +0.6%.
Futures at 6:20: Dow +0.3%. S&P +0.3%. Nasdaq +0.3%. Crude +0.6% to $94.50. Gold +0.1% to $1241.60.
Ten-year Treasury Yield flat at 2.84%.

Today's economic calendar:
8:30 Housing Starts
9:15 Industrial Production
9:55 Reuters/UofM Consumer Sentiment
10:00 Job Openings and Labor Turnover Survey

Notable earnings before today's open: BK, CMA, FHN, GE, MS, MTB, SLB, STI, WBS, WIT

See full real-time earnings coverage »

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