- Major real estate deal looms. ProLogis (PLD) confirmed late yesterday that it's in talks with rival AMB Property (AMB) about a possible merger, a move that would mark the largest publicly traded real-estate deal in years. The two industrial REIT giants have a combined market cap of $13.9B, and are considering an "all-stock, at-market transaction, based upon the unaffected trading prices of the two companies' stock prior to media reports of a possible merger." Though a transaction isn't guaranteed, sources expect a deal to be announced relatively soon. In after-hours trading, PLD +8.2%, AMB +9.6%.
- Novartis braced for rough 2011. Novartis (NVS) released its quarterly results this morning, with EPS of $0.95 vs. $1.01 in the year-earlier period and net income of $2.27B vs. $2.32B in the year-earlier period. Both those figures were slightly disappointing, though net sales of $14.2B (+10%) were largely in-line with expectations. The company warned that 2011 would be difficult, as it faces the patent loss this year of blockbusters Diovan, a heart drug with annual sales of more than $6B, and Femara, a cancer medicine with annual sales of more than $1B. Novartis will also face reduced drug prices in connection to U.S. healthcare reform. CEO Joe Jimenez expects to see 'accelerating growth' in 2013 and 2014 once the patent loss effect eases. Premarket: NVS -2.4% (7:00 ET).
- S&P downgrades Japan. S&P cut Japan's long-term sovereign-credit rating this morning to AA- from AA, noting it "expects Japan's fiscal deficits to remain high in the next few years, which will further reduce the government's already weak fiscal flexibility." The new rating is stable, as S&P believes "Japan's strong external balance sheet and monetary flexibility [will] partially offset the pressures stemming from the fiscal side." The yen dropped heavily on the news, and is currently -0.8% against the dollar (6:30 ET).
- Treasury may speed GM exit. The Treasury may offload the rest of its stake in GM (GM) within the next twelve months, according to a government official, a faster exit than the bailed-out carmaker had originally expected. The exact timing of the stock sale would depend on both market conditions and GM's financial performance, though the terms of GM's IPO prevent the government from selling additional shares until mid-May. Separately, GM Financial said late yesterday that it's selling $800M of securitized auto loans and will use the proceeds for long-term financing of its receivables. Premarket: GM +1.6% (7:00 ET).
- Potash approves stock split, doubles EPS. Potash's (POT) board of directors approved last night a three-for-one stock split, effective Feb. 16. The company also increased its quarterly cash dividend to $0.21 from $0.10 on a pre-split basis, and $0.07 per share on a post-split basis. Potash also released its quarterly earnings report this morning, with EPS more than doubling from the year-earlier period to $1.61; it was the highest quarterly total for 2010, and raised full-year EPS to $5.95, the second-highest total in the company's history. In after-hours trading, shares rose 3%.
- Netflix raises earnings, outlook. Netflix (NFLX) posted better-than-expected quarterly earnings yesterday (see details below), and said it had surpassed 20M subscribers and was on track for 22.7M-23.7M subscribers by the end of the first quarter. Netflix also expects to earn $0.90-$1.13 per share this quarter, far better than analysts' consensus of $0.87. The earnings beat, along with the positive outlook, lifted shares more than 8% in after-hours trading, and the stock is continuing to rise this morning: +12% premarket (7:00 ET).
- Intel wins EU deal clearance. Intel (INTC) won approval from EU antitrust regulators for its $7.7B deal to acquire McAfee (MFE). The approval is conditional on Intel granting rival firms access to its technology. Intel now expects to close the acquisition by the end of the quarter. Premarket: INTC +0.5% (7:00 ET).
- Sara Lee sputters on bid uncertainty. Shares of Sara Lee (SLE) slumped yesterday as uncertainty clouded the company's sale prospects. Early yesterday, media reports suggested that Sara Lee had rejected a buyout offer from a private-equity consortium led by Apollo Management which had valued the company between $18.70 and $20 per share. Sara Lee is said to be pushing Apollo to raise its bid. Meanwhile, a rumored $21/share bid from Brazilian meat processor JBS reportedly faces financing concerns. In yesterday's trading, SLE -5.7% to $18.52.
- Banks vie for Ally IPO slot. Ally Financial is said to be meeting with investment bankers this week to select the team that will handle an initial public offering. An Ally IPO would reportedly be in the range of $5B-$10B, and would help the government, which holds a 74% stake in Ally, recoup some of its money.
- Deficit spirals ever higher. The U.S. budget deficit is on track to rise to $1.48T, or 9.8% of GDP, by the end of the current fiscal year, largely because of the extension of lower tax rates and the economy's continued weakness, reported the Congressional Budget Office. That's $60B more than the White House projected last summer, and a notable increase from 2010's $1.29T deficit. The rapidly rising deficit has led some to believe that the U.S. may need to issue as much as $5T in debt during the next three years to fill the gap, a move which means 'QE3 is guaranteed.'
- New FOMC leaves policies unchanged. The Federal Open Market Committee started 2011 with some new committee members, but stuck to its 2010 stance, maintaining its near-zero rate policy and its $600B asset-purchase program, and noting that rates should remain 'exceptionally low' for an 'extended period.' Business spending rose, but payrolls remain weak and housing is still depressed. The most important change in its statement was in reference to rising commodity prices: "Although commodity prices have risen, longer-term inflation expectations have remained stable, and measure of underlying inflation have been trending downward." The implication is that the Fed wanted to acknowledge rising prices globally while suggesting they aren't impacting the U.S. enough to warrant early monetary tightening.
- S&P 500 shuffle. S&P announced McAfee (MFE) would be removed from the S&P 500 because it's being acquired by Intel. In its place, the index will add Covidien (COV). Shares of COV rose 5.7% in after-hours trading.
Earnings: Thursday Before Open
- AU Optronics (AUO): Q4 EPS of -$0.45 misses by $0.34. Revenue of $3.52B (-2.1% Y/Y) misses by $0.38B. (PR)
- BAXTER INTL (BAX): Q4 EPS of $1.11 beats by $0.01. Revenue of $3.5B (+0.8% Y/Y) beats by $0.04B. (PR)
- Colgate-Palmolive Company (CL): Q4 EPS of $1.24 beats by $0.01. Revenue of $3.98B (-2.5% Y/Y) misses by $0.08B. (PR)
- CONSOL Energy (CNX): Q4 EPS of $0.54 misses by $0.01. Revenue of $1.36B (+9.6% Y/Y) misses by $0.03B. (PR)
- Danaher (DHR): Q4 EPS of $0.67 beats by $0.01. Revenue of $3.61B (+15.2% Y/Y) beats by $0.12B. (PR)
- D.R. Horton (DHI): FQ1 EPS of -$0.06 misses by $0.03. Revenue of $767M (-30.8% Y/Y) misses by $33M. (PR)
Earnings: Wednesday After Close
- Amylin Pharmaceuticals (AMLN): Q4 EPS of -$0.13 beats by $0.19. Revenue of $174M (-6% Y/Y) misses by $16M. Shares +3.5% AH. (PR, earnings call transcript)
- Citrix Systems (CTXS): Q4 EPS of $0.65 beats by $0.05. Revenue of $530M (+18% Y/Y) beats by $22M. Shares +2.2% AH. (PR, earnings call transcript)
- Crown Castle International (CCI): Q4 EPS of $0.12 beats by $0.04. Revenue of $496M (+12% Y/Y) beats by $7M. (PR)
- Duke Realty (DRE): Q4 EPS of $0.28 beats by $0.01. Revenue of $229M (+7% Y/Y) misses by $5M. (PR)
- E*TRADE Financial (ETFC): Q4 EPS of -$0.11 misses by $0.15. Shares -2.5% AH. (PR, earnings call transcript)
- Hill-Rom (HRC): FQ1 EPS of $0.55 beats by $0.10. Revenue of $374M (+5% Y/Y) in-line. (PR)
- Lam Research (LRCX): FQ2 EPS of $1.74 beats by $0.17. Revenue of $871M (+79% Y/Y) beats by $43M. Shares -1.5% AH. (PR, earnings call transcript)
- LSI Logic (LSI): Q4 EPS of $0.14 beats by $0.01. Revenue of $664M (+4% Y/Y) beats by $15M. Shares +2.4% AH. (PR, earnings call transcript)
- Motorola Mobility Holdings (MMI): Q4 EPS of $0.37 beats by $0.01. Revenue of $M (+% Y/Y) beats by $M. Shares -6.8% AH. (PR)
- Murphy Oil (MUR): Q4 EPS of $0.90 misses by $0.11. Revenue of $6.5B (+12% Y/Y) beats by $900M. Shares -7.1% AH. (PR)
- Netflix (NFLX): Q4 EPS of $0.87 beats by $0.16. Revenue of $596M (+8% Y/Y) in-line. Shares +10.4% AH. (PR, earnings call transcript)
- Noble (NE): Q4 EPS of $0.39 beats by $0.07. Revenue of $644M (-32% Y/Y) beats by $28M. Shares +0.6% AH. (PR)
- Owens-Illinois (OI): Q4 EPS of $0.45 may not be comparable with consensus of $0.47. Revenue of $1.7B (-1% Y/Y) misses by $35M. (PR)
- Qualcomm (QCOM): FQ1 EPS of $0.82 beats by $0.10. Revenue of $3.4B (+% Y/Y) beats by $148M. Shares +6.2% AH. (PR, earnings call transcript)
- Robert Half International (RHI): Q4 EPS of $0.17 beats by $0.01. Revenue of $852M (+16% Y/Y) beats by $20M. Shares -5% AH. (PR, earnings call transcript)
- Starbucks (SBUX): FQ1 EPS of $0.45 beats by $0.06. Revenue of $3B (+8% Y/Y) in-line. Shares -2.6% AH. (PR, earnings call transcript)
- Susquehanna Bancshares (SUSQ): Q4 EPS of $0.08 beats by $0.04. Shares -0.6% AH. (PR)
- Symantec (SYMC): FQ3 EPS of $0.35 beats by $0.02. Revenue of $1.6B (+4% Y/Y) in-line. Shares +2.3% AH. (PR)
- Teradyne (TER): Q4 EPS of $0.37 beats by $0.12. Revenue of $322M (+21% Y/Y) beats by $6M. Shares +8.7% AH. (PR, earnings call transcript)
- In Asia, Japan +0.7% to 10479. Hong Kong -0.3% to 23780. China +1.5% to 2749. India flat at 18684.
- In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt +0.4%.
- Futures at 7:00: Dow +0.1%. S&P flat. Nasdaq +0.1%. Crude -0.7% to $86.75. Gold +0.4% to $1338.60.
Thursday's Economic Calendar
- 8:30 Durable Goods
8:30 Chicago Fed National Activity Index
8:30 KC Fed Manufacturing
8:30 Initial Jobless Claims
10:00 The Budget and Economic Outlook
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
12:00 PM Chicago Fed Midwest Manufacturing Index
1:00 PM Results of $29B, 7-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
- Notable earnings before Thursday's open: AUO, AVT, BAX, BEN, BMY, CAT, CELG, CL, CNX, CRUS, CY, DHI, DHR, EQT, ETN, FNFG, GNTX, JBLU, JNS, LLL, LLY, LMT, MJN, MO, MPW, MSI, NOK, NUE, NVS, NWL, PG, POT, RCL, RTN, SWK, T, TWC, TYC, WTNY, XEL, ZMH
- Notable earnings after Thursday's close: AMZN, BXS, CB, CPWR, FII, FNF, GMCR, KLAC, MSFT, MWW, PMCS, QLGC, RMD, RVBD, SNDK, THOR, VRSN
The SA Currents team contributed to this post.
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