Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:40 AM EST
S&P 500: -0.70; 1,426.80
NASDAQ 100: -0.25; 1,779.00
Dow: -1.00; 12,522.00
NIKKEI 225: +0.28%; 17,470.46 (+48.53)
HANG SENG: -0.22%; 20,236.68 (-44.45)
S&P/ASX 200: -0.16%; 5,760.40 (-9.50)
BSE SENSEX 30: -0.50%; 14,211.96 (-70.76)
FTSE 100: +0.08%; 6,232.90 (+4.90)
CAC 40: +0.47%; 5,608.62 (+26.32)
XETRA-DAX: +0.24%; 6,706.73 (+16.39)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.90%; $54.92 (-$0.50)
Gold: -0.46%; $648.50 (-$3.00)
Natural Gas: +1.46%; $7.28 (+$0.10)
Silver: -0.49%; $13.31 (-$0.065)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
• Verizon Posts Solid Quarter
Verizon Communications Inc., the second-biggest U.S. telco, said this morning Q4 profits fell 38% to $0.35/share ($1.03 billion) from $0.59 in Q4 2005, while sales rose 26% to $22.6 billion. This includes charges related to the sale of assets in the Dominican Republic and costs from the spin-off of its directories publishing business, net of which profits were $0.62 (+5%), in line with analyst forecasts of $0.61. Verizon wireless brought in 2.3 million new wireless subscribers (2.2m of which were retail) in the quarter; competitor Sprint Nextel lost 306,000 contract customers. The company continues to set records for low churn: total Q4 churn was 1.14%, and 1.17% for the year. Verizon has invested $23 billion in its high-speed Internet and TV service, hoping to compete with cable companies offering phone service. For 2007, the company said it has a target of $17.5-17.9 billion in capital expenses, and $1.7b in share repurchases (same as 2006). CEO Ivan Seidenberg: "We had a strong 2006 both operationally and financially. We have become a leaner, more competitive and global company, with a greater percentage of our revenues from broadband and other growth initiatives." Shares were up $0.17 (0.45%) in pre-market trading.
• Sources: Press Release, Bloomberg, MarketWatch, TheStreet
• Related commentary: Verizon: 2007 A 'Tipping Point' For Earnings Growth?, Citi: Buy AT&T and Sell Verizon, Check for Verizon's Earnings Conference Call Transcript later today.
• Potentially impacted stocks and ETFs: Verizon Communications Inc. (VZ). Competitors: AT&T Inc. (T), Sprint Nextel Corp. (S), Qwest Communications International Inc. (Q), Comcast Corp. (CMCSA). ETFs: iShares S&P Global Telecom ETF (IXP), iShares Dow Jones U.S. Telecom Sector Index ETF (IYZ), PowerShares Dynamic Telecom & Wireless ETF (PTE), PowerShares FTSE RAFI Telecommunications & Technology Portfolio (PRFQ), Vanguard Telecom Services ETF (VOX), Telecom HOLDRS ETF (TTH)
• Phelps Dodge Earnings Rise Nearly 1,100%
Phelps Dodge Corp. reported profits rose nearly 1,100% from the previous year period bolstered by the rising price of Copper and a one-time fee from its failed takeover of fellow miner Inco. By the numbers, Phelps Dodge had profits of $1.32 billion, good for EPS of $6.50, versus earnings of $121.3 (EPS of $0.60) during the prior-year period. Revenue rose 43% to $3.2 billion. Consensus Bloomberg estimates called for EPS of $4.36. Phelps Dodge, the world's third largest copper miner, is poised to be acquired by Freeport-McMoRan Copper & Gold Inc. though it's not clear exactly when that deal will close.
• Sources: Press Release, Bloomberg, Reuters
• Related commentary: Phelps Dodge: SAC Capital's Stake Down, Freeport-McMoRan: Q4 Earnings Miss, Prices and Production Down, Cramer's Take on PD
• Potentially impacted stocks and ETFs: Freeport-McMoRan Copper & Gold (FCX), Phelps Dodge (PD). Competitors: Cabot (CBT), Southern Copper (PCU), Newmont Mining (NEM), Rio Tinto (RTP). ETFs: SPDR Metals and Mining ETF (XME), Market Vectors Gold Miners ETF (GDX)
• Canon Reports Another Year of Record Earnings, But Forecasts Slower '07 Growth Due to Forex
Canon reports its Q4 profit rose 16% to ¥125.6 billion ($1.03b) leading to a seventh consecutive year of record annual earnings, at ¥455b ($3.75b, +18.5% y-o-y). It forecasts net income growth of 8.7% to ¥495b ($4.08b) in '07 and operating profit growth of 8.2% to ¥765b ($6.3b), for another annual record, but short of the ¥771.7b ($6.35b) consensus estimate for operating profit polled by Reuters. This year will be its slowest earnings growth since 1999, primarily due to an expected lack of positive currency impact. "But the good business environment won't change," according to a Canon financial executive. Full year 2006 operating profit was boosted by ¥78b ($642m) to ¥707b ($5.82b) due to the weaker yen -- more than 75% of its sales are outside of Japan. Sales increased 8.6% in Q4 to ¥1.2t ($9.9b) and rose 10.7% on the year to ¥4.157t ($34.2b). Canon expects sales growth of 7.1% in 2007 to ¥4.45t ($36.6b). Canon said it will buyout SED TV partner Toshiba's stake and still plans to bring SED TVs to market (Japan) in Q4. Its ordinary shares closed flat ahead of its earnings release at ¥6,500 ($53.28 ADR equiv. at ¥122/$1).
• Sources: Earnings release and presentation [pdf], Bloomberg, NYT-AP, NYT-Reuters
• Related commentary: Rumors on the (Anti-Dust?) New Canon 40D, Canon Blows Away Own Q2 Profit Forecast, Ups Full-year Guidance & Dividend, Significance of the Surprisingly Weak Yen
• Potentially impacted stocks and ETFs: Canon (CAJ). ETFs: BLDRS Asia 50 ADR Index (ADRA), iShares S&P/TOPIX 150 (ITF)
• Abitibi/Bowater to Join in Merger of Equals
Abitibi-Consolidated Inc. and Bowater Inc. said this morning they would merge in a joining of equals, making them the No. 8 publicly traded global forest-products company, and 3rd in North America. The new company, AbitibiBowater, will be held 52% by Bowater's shareholders and 48% by Abitibi's; each Abitibi share will be exchanged for 0.06261 share of the new company, and each Bowater share will get 0.52 share. This reflects their diverse share prices: Abitibi's closed Friday at $2.64, while Bowater closed at $22.15. The companies said they expect to save US$250 million annually, notwithstanding their respective efficiency drives. Abitibi shares traded up $0.51 (19.3%), and Bowater shares traded up $1.85 (8.35%) in pre-market trading.
• Sources: Press Release, MarketWatch
• Related commentary: Abitibi's Better Than It Looks on Paper - Barron's, Abitibi: Ugly Paper Duckling Can Become a Swan, Trees and Paper: The Rodney Dangerfield of Commodity Stocks
• Potentially impacted stocks and ETFs: Abitibi-Consolidated Inc. (ABY), Bowater Inc. (BOW). Competitors: International Paper Co. (IP), Kimberly-Clark Corp. (KMB), Meadwestvaco Corp. (MWV), Domtar Inc. (DTC), Potlatch Corp. (PCH)
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Asian Headlines (via Bloomberg.com)
• Yen Falls to More Than Four-Year Low; Report Shows Consumer Spending Waned The yen declined to the lowest against the dollar in more than four years after a Japanese government report today showed a drop in retail sales.
• Asian Steelmaker Stocks Rise, Led by Posco; Sony, Samsung Electronics Drop Asian steelmaker stocks advanced on speculation Posco (PKX) will become a takeover target and after JFE Steel Corp. said it's considering a broader alliance with the Hyundai Group of South Korea.
• Barclays, Standard Chartered Turn Yen Bears as Japan Delays Rate Increase Barclays Capital and Standard Chartered Bank Plc are turning into bears on the yen as the Bank of Japan delays raising interest rates.
European Headlines (via Bloomberg.com)
• U.K. January Retail Sales Rise to Highest in Two Years, CBI Survey Shows An index of U.K. retail sales rose to the highest in two years as New Year discounts spurred Britons to buy more clothes and goods such as washing machines, the Confederation of British Industry said.
• European Stocks Gain for First Day in Three, Paced by Infineon, Prudential European stocks rose for the first time in three days after Citigroup Inc. (C) agreed to buy Prudential Plc's Internet banking unit and Hochtief AG paced gains by construction companies on bid speculation.