- AES to buy DPL for $3.5B. Power company AES (AES) has agreed to buy DPL (DPL) for $3.5B in cash as part of a strategy of expanding its footprint in the midwest. AES is offering $30 a share, a premium of about 9% on DPL's closing share price yesterday of $27.59. AES will also assume DPL's $1.2B of debt. The deal will give AES 500,000 retail customers in Ohio, and is part of a wider trend of consolidation among utility companies as they look to cut costs and pool funds for new and replacement projects.
- Intel defies the gloom. Despite fears about what the success of tablets will do to demand for its PC semiconductors, as well as other worries, Intel (INTC) produced record earnings in Q1 2011 that blew past expectations. Benefiting from strong corporate demand for PCs, net EPS jumped 29% to a record $0.56, easily slaying analyst predictions of $0.46; revenue rose 25% to $12.8B, above expectations of $11.6B. Intel gave further cheer to investors by forecasting that Q2 revenue will beat predictions, and shares, which rose 4.6% in after-hours trading, are now +8.3% premarket (6:45 ET). (Earnings call transcript)
- IBM beats forecasts but shares fall. IBM's (IBM) shares fell 1.9% post-market even though Q1 2011 net profit beat forecasts with a 10% rise to $2.41 a share, helped by revenue climbing 7.6% to $24.6B. The results were boosted by improved margins, a weak dollar and a broad pick-up in the company's server business. In addition, IBM raised its full-year earnings expectation from $13 per share to $13.15, above a consensus $13.08. The reason for the market reaction to IBM's earnings may have been because of a surprising 18% slump in service contract signings, although CFO Mark Loughridge dismissed the parameter as a volatile measure that doesn't directly predict service revenue. (Earnings call transcript)
- VMware shares surge after earnings beat. VMware (VMW) was another major tech play to beat expectations as 2011 Q1 net profit excluding some one-time items rose to $0.48 from $0.32 a year earlier, exceeding estimates of $0.42. Revenue rose 33% to $844M compared with predictions of $815M, with the virtualization software company "closing large enterprise license agreements" during the quarter. It predicted that Q2 sales will beat expectations also. One analyst at Fort Pitt was highly impressed. "They had super-strong numbers, it was a real surprise," the analyst said. The market agreed with the sentiment and shares jumped 12.5% in post-market trading. (Earnings call transcript)
- BofA to spin off $5B PE unit. Bank of America (BAC) plans to spin off BAML Capital Partners, its last large private-equity fund. BofA explained the decision by saying that the business, whose assets exceed $5B, was "not strategically critical to customers and our clients." The spin-off is the latest in a series of moves by BofA to comply with the Volcker Rule, which limits proprietary trading, or investments by banks using their own capital. It's also in line with efforts by CEO Brian Moynihan to sell off extraneous units.
- Apple expected to show strong Q2 growth. Apple (AAPL) is due to release its fiscal Q2 results after the market closes today, with analysts predicting that EPS jumped 61% to $5.36 and revenue 73% to $23.3B. However, a major focus for the market will be how much the Japan earthquake has affected Apple's supply chain and demand for its products in the country. The belief is that the disaster could pose challenges but won't lead to long-term problems. "We think the impact is overstated, but the concern is out there and it's a bit of an unknown," said Solaris' chief investment officer. Apple's results come as a report says that its next-generation iPhone will have a faster processor and will begin shipping in September.
- Executive found guilty in $2.9B mortgage fraud case. A jury has convicted Lee Farkas, the majority owner of what was one of the biggest mortgage companies in the U.S., of all 14 counts in a $2.9B fraud case. In conduct that was described as pouring "fuel on the fire of the financial crisis," Farkas was found guilty of conspiracy, and bank, wire and securities fraud for the period when he was chairman of Taylor Bean & Whitaker. The fraud caused the company's 2009 collapse and contributed to the fall of Alabama-based Colonial Bank, the sixth-largest bank failure in U.S. history. Farkas, who could spend the rest of his life in prison, plans to appeal.
- Rajaratnam trial heads for close. The trial of hedge fund manager Raj Rajaratnam enters its final stages, with closing arguments due to be heard today. Prosecutors accuse Rajaratnam of illegally making $63.8M by trading on tips from a network of highly-placed corporate insiders.
- Justice Department seeks info on potential NYSE mergers. The Justice Department is asking market participants about how a merger of NYSE Euronext (NYX) with Nasdaq OMX (NDAQ) or Deutsche Boerse (OTCPK:DBOEY) would affect companies trying to raise money in the U.S., a source said. Yesterday, Nasdaq and Intercontinental Exchange (ICE) sweetened their hostile $11.3B offer for NYSE by saying they are prepared to pay a $350M breakup fee if the deal falls through because of antitrust concerns. Nasdaq and ICE have also secured fully committed financing of $3.8B to fund the bid. Separately, Nasdaq said today that Q1 2011 EPS rose 42% to a record $0.61 despite what it called 'challenging macroeconomic headwinds.' This was in line with forecasts.
- Air Lease gains altitude on debut. Shares in Air Lease (AL) rose 5.5% to $27.95 on their NYSE debut yesterday in a sign the air-leasing sector, which lends aircraft to airlines, is recovering from the financial crisis. Air Lease raised $802.5M in its IPO after selling 30.3M shares, having planned to sell 25M. The listing was priced within range at $26.50. The company has a market cap of $10.5B.
- Investment in hedge funds pass $2T for first time. The recovery of hedge funds following the financial crisis seems to be well and truly entrenched. Investors added $32B in new money in Q1 2011, sending assets under management to a record $2.02T, data from Hedge Fund Research shows. During the crisis, the average fund lost 19% and many managers lost significantly more.
- Berkshire Partners in talks to buy Husky for up to $2B. Boston-based private-equity firm Berkshire Partners is in advanced talks to buy Husky Injection Molding Systems from Canada's Onex in a deal that could be worth up to $2B, sources say. Husky is one of the world's largest suppliers of injection molding equipment and services to the plastics industry.
Earnings: Wednesday Before Open
- Altria (MO): Q1 EPS of $0.44 in-line. Revenue of $3.94B (-0.2% Y/Y) beats by $0.05B. (PR)
- Autoliv (ALV): Q1 EPS of $1.92 beats by $0.16. Revenue of $2.10B (+22.6% Y/Y) beats by $0.08B. Shares +7.74% premarket (PR)
- Eaton (ETN): Q1 EPS of $0.84 beats by $0.04. Revenue of $2.10B (+22% Y/Y) beats by $0.08B. (PR)
- Elan (ELN): Q1 EPS of -$0.01 beats by $0.04. Revenue of $310M (-0.8% Y/Y) beats by $13M. Shares +1.22% premarket (PR)
- EnCana (ECA): Q1 EPS of $0.02 may not be comparable with consensus of $0.15. (PR)
- Hanesbrands (HBI): Q1 EPS of $0.49 beats by $0.16. Revenue of $1.03B (+12% Y/Y) beats by $0.03B. (PR)
- Huntington Bancshares (HBAN): Q1 EPS of $0.14 beats by $0.02. (PR)
- Nasdaq (NDAQ): Q1 EPS of $0.61 in-line. Revenue of $415M (+3.8% Y/Y) beats by $6M. (PR)
- Knight Capital Group (KCG): Q1 EPS of $0.33 beats by $0.06. Revenue of $340M (+19% Y/Y) beats by $44M. (PR)
- Textron (TXT): Q1 EPS of $0.10 misses by $0.07. Revenue of $2.48B (+12% Y/Y) misses by $0.03B. (PR)
- United Technologies (UTX): Q1 EPS of $1.13 beats by $0.06. Revenue of $13.34B (+10.8% Y/Y) beats by $490M. (PR)
Earnings: Tuesday After Close
- Albemarle (ALB): Q1 EPS of $1.15 beats by $0.19. Revenue of $697M (+20% Y/Y) beats by $61M. (PR)
- Cree (CREE): FQ3 EPS of $0.27 misses by $0.02. Revenue of $219M (-6.4% Y/Y) beats by $1.8M. Shares -4.4% AH. (PR, earnings call transcript)
- Crown Holdings (CCK): Q1 EPS of $0.48 beats by $0.06. Revenue of $1.8B (+6% Y/Y) in-line. (PR)
- CSX (CSX): Q1 EPS of $1.06 beats by $0.02. Revenue of $2.8B (+12.4% Y/Y) beats by $0.06B. Shares -0.7% AH. (PR)
- Fulton Financial (FULT): Q1 EPS of $0.17 in-line. (PR)
- Hub Group (HUBG): Q1 EPS of $0.28 misses by $0.01. Revenue of $485M (-66% Y/Y) beats by $18M. Shares -0.7% AH. (PR)
- IBM (IBM): Q1 EPS of $2.41 beats by $0.11. Revenue of $24.6B (+8% Y/Y) in-line. Shares +2.1% AH. (PR, earnings call transcript)
- Intel (INTC): Q1 EPS of $0.56 beats by $0.10. Revenue of $12.8B (+25%Y/Y) beats by $0.8B. Shares +5.7% AH. (PR, earnings call transcript)
- Intuitive Surgical (ISRG): Q1 EPS of $2.59 beats by $0.10. Revenue of $388M (+18.1% Y/Y) beats by $7M. Shares -1.3% AH. (PR, earnings call transcript)
- Juniper Networks (JNPR): Q1 EPS of $0.32 in-line. Revenue of $1.1B (+20.7% Y/Y) in-line. Shares +2.5% AH. (PR, earnings call transcript)
- Riverbed Technology (RVBD): Q1 EPS of $0.20 beats by $0.01. Revenue of $164M (+45.5% Y/Y) beats by $2M. Shares +1.4% AH. (PR)
- Stryker (SYK): Q1 EPS of $0.90 in-line. Revenue of $2B (+12% Y/Y) in-line. (PR, earnings call transcript)
- United Rentals (URI): Q1 EPS of -$0.32 misses by $0.20. Revenue of $532M (+11.3% Y/Y) misses by $18M. Shares -4.7% AH. (PR)
- VMware (VMW): Q1 EPS of $0.48 beats by $0.06. Revenue of $844M (+33% Y/Y) beats by $28M. Shares +8% AH. (PR, earnings call transcript)
- Wynn Resorts (WYNN): Q1 EPS of $1.38 beats by $0.65. Revenue of $1.26B (+39% Y/Y) beats by $0.1B. Shares +2.2% AH. (PR, earnings call transcript)
- Yahoo (YHOO): Q1 EPS of $0.17 beats by $0.01. Revenue of $1.06B (-5% Y/Y) in-line. Shares +3.1% AH. (PR, earnings call transcript)
- In Asia, Japan +1.8% to 9607. Hong Kong +1.6% to 23896. China +0.3% to 3008. India +1.8% to 19471.
- In Europe, at midday, London +2.3%. Paris +2.3%. Frankfurt +2.8%.
- Futures at 7:00: Dow +1.1%. S&P +1.3%. Nasdaq +1.2%. Crude +1.1% to $109.50. Gold +0.6% to $1503.90.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
- Notable earnings before Wednesday's open: ABT, ALV, AMB, APH, DGX, ECA, ELN, EMC, ETN, FCX, HBAN, HBI, HCBK, KCG, MO, MTG, NDAQ, PLD, STJ, T, TIN, TXT, UNP, USG, UTX, WFC
- Notable earnings after Wednesday's close: AAPL, AMGN, AMR, AXP, BSX, CAKE, CMG, CVA, ESV, ETFC, FFIV, GILD, KNX, LRCX, MAR, NE, NFX, PBCT, QCOM, RRR, SLM, TEX, WDC, WLT, YUM
The SA Currents team contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.