- Williams to split in two. Williams Companies (WMB) announced yesterday that it will split the company into two stand-alone units, a move meant to speed Williams' growth and boost the value of its assets. It will spin off its exploration and production business through an IPO in the third quarter this year, offloading up to 20% of its interest in the IPO and the remaining interest in 2012. The natural gas company also raised its quarterly dividend by 60% to $0.20/share, and plans another 10%-15% increase in mid-2012. In after-hours trading, WMB +13.3%.
- Banks ordered to stress-test renewed recession. The country's 19 largest banks were ordered to run stress tests against a scenario that reportedly included renewed recession with unemployment above 11%. The banks, which had to run the tests against at least three different economic outcomes, submitted their plans last month and the Federal Reserve will finish its review in March. Fed officials aren't expecting an economic slump (see FOMC story below).
- FOMC mulled QE2 reduction. Minutes from the latest FOMC meeting revealed that some Federal Reserve officials had discussed the possibility of scaling back the $600B Treasury bond purchase program, but ultimately decided the economy wasn't improving fast enough to make a noticeable dent in unemployment. The committee raised its 2011 growth forecast to 3.4-3.9%, from an earlier projection of 3.0-3.6%. Despite mounting inflation concerns, officials still expect very slow increases to U.S. consumer prices, with overall inflation for 2011 expected at 1.3-1.7% vs. a November projection of 1.1-1.7%.
- Firms to face mortgage-servicing fines. More than a dozen financial firms are expected to face formal enforcement actions in connection to mortgage-servicing practices, sources said. Officials haven't yet finalized the exact details of the enforcement actions, which cover breakdowns in procedures for payment collection, loan modifications and foreclosures, but are considering fines and forced changes to how companies operate. Bank of America (BAC), JPMorgan (JPM) and Wells Fargo (WFC) are said to be among the banks that will be affected.
- NetApp falls on weak revenue, guidance. NetApp (NTAP) reported FQ3 earnings yesterday (see details below), beating profit estimates but disappointing investors with relatively weak revenue and a Q4 outlook below consensus. Revenue results were hurt by component shortages, a problem likely to continue this quarter as the company tries to catch up to higher-than-expected demand for new products. The bottleneck comes as NetApp, a data-storage company, faces increased competition from larger rivals like Dell (DELL), EMC (EMC) and IBM (IBM). Looking ahead, the company expects Q4 EPS of $0.49-0.53 vs. analysts' expectations of $0.54; NetApp executives attributed the weakness to a higher number of diluted shares outstanding because of convertible notes and warrants. Shares fell more than 8% in after-hours trading, before recovering to -4.1% following the company's conference call (transcript).
- Regulators break financial firms into four groups. The Financial Oversight Stability Council has divided non-bank financial firms into four categories as it tries to determine which companies could pose a risk to the financial system and deserve additional oversight. According to testimony that the FDIC's Sheila Bair will deliver to the Senate Banking Committee today, the sectors are: 1) the hedge fund, private equity firm and asset management industries, 2) the insurance industry, 3) specialty lenders, and 4) broker-dealers and futures commission merchants. Bair will testify that the level of systemic risk varies 'significantly' across the sectors.
- Appeals court setback for mortgage investors. A federal appeals court gave bankruptcy judges broad discretion in valuing mortgage buybacks after markets seize up. It was a blow for Credit Agricole (CRARY.PK), which had sued American Home Mortgage Investment Corp. for $478.5M. Credit Agricole's claim was based on the 'market value' of the loans it was left holding a year after American Home went bankrupt in 2007, but the judge ruled the market couldn't be used as a determinant of value because the market at that time was 'dysfunctional.' The ruling sets a precedent that could hurt investors trying to recover losses on troubled mortgages, as they'll face an alternate valuation process that will cut the value of their claims.
- Senators work on deficit plan. A bipartisan group of senators is working on legislation that would trigger new taxes and budget cuts if Congress fails to meet certain fiscal goals aimed at cutting the deficit. The plan breaks deficit reduction into four sections: a tax code overhaul; spending cuts; changes to entitlement programs like Medicare; and, changes to Social Security, which lawmakers are more hesitant to alter. An outline of the plan's targets and penalties is expected to be circulated by early next month.
- Government cracks down on illegal corporate hiring. The federal government is requiring as many as 1,000 companies to turn over their employment records for inspection, the largest such audit since 2009. Officials are focused on businesses suspected of hiring illegal immigrants, with the agriculture, food-processing and hospitality industries likely to be hit the hardest. Recent offenders include Chipotle Mexican Grill (CMG), which was forced to fire hundreds of illegal workers, Abercrombie & Fitch (ANF) and American Apparel (APP).
Earnings: Thursday Before Open
- Duke Energy (DUK): Q4 EPS of $0.21 misses by $0.02. Revenue of $3.44B (+11% Y/Y) beats by $0.28B. (PR)
- Huntsman (HUN): Q4 EPS of $0.24 beats by $0.04. Revenue of $2.4B (+17% Y/Y) beats by $0.1B. (PR)
Earnings: Wednesday After Close
- Avis Budget Group (CAR): Q4 EPS of -$0.06 in-line. Revenue of $1.22B (+5.7% Y/Y) in-line. Shares +1.2% AH. (PR)
- Brandywine Realty Trust (BDN): Q4 EPS of $0.33 beats by $0.01. Revenue of $148M (+2% Y/Y) beats by $4M. (PR)
- CBS (CBS): Q4 EPS of $0.46 beats by $0.02. Revenue of $3.9B beats by $0.05B. Shares -0.7% AH. (PR, earnings call transcript)
- Cliffs Natural Resources (CLF): Q4 EPS of $2.82 beats by $0.65. Revenue of $1.42B (+74% Y/Y) in-line. Shares +9.8% AH. (PR)
- Express Scripts (ESRX): Q4 EPS of $0.71 beats by $0.01. Revenue of $11.3B (+38% Y/Y) beats by $0.32B. Shares -1.6% AH. (PR)
- Health Management Associates (HMA): Q4 EPS of $0.16 in-line. Revenue of $1.35B (+14% Y/Y) in-line. (PR)
- Input/Output (IO): Q4 EPS of $0.14 beats by $0.07. Revenue of $159M (+31% Y/Y) beats by $48M. Shares +10.9% AH. (PR)
- InterMune (ITMN): Q4 EPS of $3.34 beats by $2.70. Revenue of $242M (+3560% Y/Y) beats by $188M. Shares +3.9% AH. (PR)
- Kinross Gold (KGC): Q4 EPS of $0.13 misses by $0.02. Revenue of $920M (+32% Y/Y) in-line. Shares -0.8% AH. (PR)
- NetApp (NTAP): FQ3 EPS of $0.52 beats by $0.02. Revenue of $1.27B (+25% Y/Y) in-line. Shares -7.6% AH. (PR, earnings call transcript)
- Newfield Exploration (NFX): Q4 EPS of $1.16 may not be comparable with consensus of $1.25. Revenue of $528M (+28% Y/Y) misses by $70M. Shares -1.5% AH. (PR)
- Nvidia (NVDA): Q4 EPS of $0.29 may not be comparable with consensus of $0.22. Revenue of $886M (-10% Y/Y) misses by $6M. Shares +2% AH. (PR, earnings call transcript)
- Skechers USA (SKX): Q4 EPS of $0.07 misses by $0.06. Revenue of $455M (+17% Y/Y) beats by $44M. Shares -6.7% AH. (PR)
- In Asia, Japan +0.3% to 10837. Hong Kong +0.6% to 23302. China +0.1% to 2927. India +1.1% to 18507.
- In Europe, at midday, London +0.1%. Paris -0.1%. Frankfurt flat.
- Futures at 7:00: Dow flat. S&P -0.1%. Nasdaq -0.1%. Crude -0.3% to $84.75. Gold +0.2% to $1378.40.
Thursday's Economic Calendar
- 8:30 Consumer Price Index
8:30 Real Earnings
8:30 Initial Jobless Claims
10:00 Leading Indicators
10:00 Hearing: Progress Report on Financial Reform (Bernanke, Bair, Schapiro...)
10:00 Philly Fed Business Outlook
10:00 Hearing: Interchange Fees (Fed's Raskin)
10:30 EIA Natural Gas Inventory
11:30 Fed's Lockhart: 'Roads to Recovery'
1:20 PM Fed's Evans: Economic Outlook
2:30 PM Hearing: Agriculture and the Economy (Fed's Hoenig)
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
- Notable earnings before Thursday's open: ABX, APA, DPS, DUK, ECL, EPD, HUN, NXY, PCG, PDE, TRW, VTR, WM, WMB
- Notable earnings after Thursday's close: ARUN, BRCD, BUCY, CF, CLWR, DDR, EOG, INTU, JWN, KEG, SHO, SPWRA
The SA Currents team contributed to this post.
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