Wall Street Breakfast: Must-Know News

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 |  Includes: AAL, AAPL, AIG, BA, BAC, BGPIQ, BKS, CLX, EADSF, GLD, GOOG, IBM, LMCA, NVS, NWS, ORCL, QQQ, SPY, USO
by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
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.

Is Murdoch nearing the end of his reign? News Corp. (NASDAQ:NWS) is considering replacing Rupert Murdoch as CEO with COO Chase Carey, sources say, with any move dependent on Murdoch's performance today in front of a U.K. parliamentary committee. However, an independent director said the board is behind Murdoch, while his voting power ensures he can influence any decision about his role. Murdoch will face questions along with son James, whose own future is in doubt, and Rebekah Brooks; proceedings are due to start at 9.30 am ET.

BofA posts $8.8B loss. Bank of America (NYSE:BAC) swung to a Q2 net loss of $8.8B from a net profit of $3.1B a year earlier, although excluding the mortgage-related charges it has announced, net income was $3.7B. BofA's operations benefited from lower credit costs, gains from the sale of non-core assets and debt securities, improved sales and trading revenues, and higher asset management and investment banking fees.

IBM beats forecasts, raises guidance. IBM's (NYSE:IBM) Q2 earnings topped forecasts as net profit rose 8% to $3.66B and revenue climbed 12% to $26.7B, while the company also raised its 2011 guidance. IBM enjoyed growth in all of its major businesses, although shares only rose 1.7% post market. Analysts are concerned about IBM's ability to cope with growing competition, particularly in outsourcing, and its increased spending. Still, along with Oracle's (NYSE:ORCL) results, IBM's earnings indicate that companies around the world continue to spend on IT even if they defer other investments. (Earnings call transcript)

Cracks appear in ECB hardline. ECB Governor Ewald Nowotny has broken ranks with the ECB's tough stance towards Greece, saying a "very short-lived default" would "not really have major negative consequences." Nowotny's comments are in stark contrast to those of ECB President Jean-Claude Trichet, who insists the bank won't accept defaulted Greek bonds as collateral, effectively ruling out a rollover and complicating efforts to formulate a second bailout. EU leaders are due to meet on Thursday to discuss the issue but markets continue to be unnerved.

Airbus in the lead for AMR order. American Airlines (AMR) is leaning towards buying Airbus' (OTCPK:EADSF) A320 jets rather than Boeing's (NYSE:BA) 737s in a deal for over 200 planes that could be worth $20B at list prices, sources say. AMR's board could make a decision when it meets tomorrow and last-minute offers could still have an impact. Entry into American's Boeing-only fleet would be a coup for Airbus and a blow to Boeing, which risks falling further behind its rival as it decides on a successor to the 737.

AIG weighs IPO for aircraft-leasing unit. AIG (NYSE:AIG) is considering an IPO for its airplane-leasing business, sources say, and could raise $1.5B-$2B with a sale of 25% if market conditions are favorable. The company has been encouraged by the IPO of Air Lease, a new firm that raised $900M in April. AIG would use the proceeds of the listing to help pay back the government for its bailout.

Novartis net profit rises 12%. Novartis (NYSE:NVS) beat consensus as Q2 net profit (.pdf) climbed 12% to $2.7B and sales jumped 27% to $14.9B, boosted by the recent acquisition of eye-care specialist Alcon, the rapid growth of recently launched drugs, and cost cutting. Novartis expects demand for its new treatments to offset competition from cheaper copies of some of its drugs as they lose patent protection.

Apple hits record ahead of earnings. Apple's (NASDAQ:AAPL) shares rose 2.4% to close at a record high of $373.80 ahead of the company's FQ3 earnings today, when it is forecast to report that EPS surged 66% to $5.85 and revenue 59% to $24.99B. While iPad sales are expected to have soared following the release of the iPad 2, iPhone sales may be weaker than predicted, as no new device was released in the quarter. Investors will therefore be looking for details of a new possibly cheaper version that can better fend off competition from Android (NASDAQ:GOOG) handsets.

Borders to close. After failing to find a white knight Borders (OTC:BGPIQ) will seek approval to liquidate, leading to the loss of nearly 11,000 jobs. Opinion was mixed about the effect of its closure on Barnes & Noble's (NYSE:BKS) $1B sale to Liberty Media (LCAPA): Borders' demise could lure another bidder for Barnes and so raise its value, although the latter also has its own problems.

Robo-signing continues. Despite major banks facing billions of dollars in penalties for faulty foreclosures, AP and Reuters have found that problematic practices continue. These include widespread "robo-signing" and the filing of thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts.

Cisco confirms major job reduction. Cisco is cutting 6,500 employees - or 9% of its full-time workforce - as it looks to return to profit growth. The layoffs include a 15% reduction at the VP level and above, and 2,100 employees taking early retirement. Cisco is also selling a set-top box factory to Taiwan's Hon Hai Precision Industry as part of its strategy to focus on its core switching and router businesses.

Clorox rejects Icahn. Clorox (NYSE:CLX) has turned down Carl Icahn's $10.2B offer, calling it "neither credible nor adequate," and adopted a "poison pill" shareholder rights plan to make an unwanted takeover more expensive. "We're certainly not opposed to a sale, just a steal," said Clorox CEO Don Knauss.

Obama scales back debt ambition. As the debt talks continue to go nowhere, President Obama has accepted that a grand $4T plan is out of reach. The most likely option now appears to be a Senate-hatched plan to let Obama raise the debt ceiling by $2.4T in three increments but to give the House "ownership" of the program so that it has a better chance of passing. Almost doomed to fail is the GOP's "Cut, Cap and Balance Act," which the House is due to vote on today.

Earnings: Tuesday Before Open

  • Bank of America (BAC): Q2 EPS of $0.33 beats by $0.03. Revenue of $13.48B (-50.2% Y/Y). Shares +1.9% premarket. (PR)
  • Bank of New York Mellon (NYSE:BK): Q2 EPS of $0.59 beats by $0.03. Revenue of $3.85B (+15.2% Y/Y). (PR)
  • Comerica (NYSE:CMA): Q2 EPS of $0.53 in-line. (PR)
  • Harley-Davidson (NYSE:HOG): Q2 EPS of $0.81 beats by $0.10. Revenue of $1.34B (+18% Y/Y). Raises motorcycles shipment FY'11 guidance to 228K-235K. (PR)
  • KeyCorp (NYSE:KEY): Q2 EPS of $0.26 beats by $0.06. Revenue of $1.02B (-8.2% Y/Y). (PR)
  • Omnicom Group (NYSE:OMC): Q2 EPS of $0.96 beats by $0.05. Revenue of $3.49B (+14.7% Y/Y). (PR)
  • UnitedHealth (NYSE:UNH): Q2 EPS of $1.16 beats by $0.18. Revenue of $25.2B (+8.5% Y/Y). Sees FY'11 EPS of $4.15-4.25; Revenue $101B. (PR)

Earnings: Monday After Close

  • IBM (IBM): Q2 EPS of $3.09 beats by $0.07. Revenue of $26.67B (+12.4% Y/Y). Shares -0.2% AH. (PR, earnings call transcript)
  • Lincare (NASDAQ:LNCR): Q2 EPS of $0.45 misses by $0.06. Revenue of $449M (+7.3% Y/Y). Shares -3.8% AH. (PR)
  • Mosaic Company (NYSE:MOS): FQ4 EPS of $1.45 beats by $0.05. Revenue of $2.86B (+54% Y/Y). Shares +1.5% AH. (PR)
  • Packaging of America (NYSE:PKG): Q2 EPS of $0.39 beats by $0.04. Revenue of $665.5M (+8% Y/Y). Shares +0.3% AH. (PR)
  • Stanley Works (NYSE:SWK): Q2 EPS of $1.46 beats by $0.20. Revenue of $2.6B (+11% Y/Y). Shares -0.5% AH. (PR)
  • Steel Dynamics (NASDAQ:STLD): Q2 EPS of $0.43 beats by $0.04. Revenue of $2.1B (+27% Y/Y). Shares +3.7% AH. (PR)
  • Wynn Resorts (NASDAQ:WYNN): Q2 EPS of $1.60 beats by $0.57. Revenue of $1.4B (+32.3% Y/Y). Shares +2.7% AH. (PR, earnings call transcript)
  • Zions Bancorp (NASDAQ:ZION): Q2 EPS of $0.16 vs. consensus of $0.01. Shares +1.2% AH. (PR, earnings call transcript)

Today's Markets

  • In Asia, Japan -0.8% to 9890. Hong Kong +0.5% to 21902. China -0.7% to 2798. India +0.8% to 18654.
  • In Europe, at midday, London +0.5%. Paris +1.4%. Frankfurt +1.5%.
  • Futures at 7:00: Dow +0.6%. S&P +0.7%. Nasdaq +0.7%. Crude +0.9% to $96.77. Gold +0.2% to $1605.10.

Tuesday's Economic Calendar

7:45 ICSC Retail Store Sales
8:30 Housing Starts
8:55 Redbook Chain Store Sales

The Market Currents team contributed to this post.


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