Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:51 AM EST
S&P 500: -0.60; 1,415.20
NASDAQ 100: +1.50; 1,782.75
Dow: -4.00; 12,325.00
NIKKEI 225: +0.90%; 17,163.20 (+153.65)
HANG SENG: +0.47%; 19,356.90 (+90.16)
S&P/ASX 200: +0.29%; 5,876.60 (+16.90)
BSE SENSEX 30: +0.48%; 12,705.94 (+60.95)
FTSE 100: -0.21%; 6,176.30 (-13.10)
CAC 40: -0.42%; 5,435.90 (-23.05)
XETRA-DAX: -0.15%; 6,661.42 (-9.99)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.51%; $56.88 (+$0.29)
Gold: +0.31%; $656.30 (+$2.00)
Natural Gas: +0.19%; $6.86 (+$0.01)
Silver: +0.66%; $13.32 (+$0.087)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
U.S. Housing Starts Gain 9%, Beating Expectations; Futures Higher
Housing starts rebounded in February, posting an increase of 9% after they declined by 14% in January. Year-over-year, groundbreaking on new homes is down 28.5% compared with February 2006, according to the Dept. of Commerce. The seasonally adjusted annual rate for February came in at 1.525 million, up from a 10-year low of 1.399 million in January (revised). Economists expectations were for a smaller annual rate of between just 1.45 million (Bloomberg) and 1.46 million (MarketWatch). Housing starts are considered to be fairly seasonally volatile, based on weather; starts jumped 18% and 26% in the South and West, respectively, where the weather was better, offsetting declines of 14% and 30% in the Midwest and Northeast where weather conditions were uncooperative in February. Building permits fell 2.5% - economists expected the number to be roughly unchanged. U.S. futures, which had been down prior to the housing data, recovered on the news, entering positive territory.
Sources: MarketWatch, Bloomberg
Commentary: Who's to Blame for Subprime Woes? Not the Fed. • Housing and Misuse of the Stock Market • How the Sub-Prime Mortgage Crisis Could Spread
Stocks/ETFs to watch: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB)
FactSet Beats Estimates, Boosts Dividend and Buyback
FactSet Research Systems, a leading provider of financial information and analytical applications, reported Q2 (ended Feb. 28) net income of $26.5 million (+38% y-o-y), or $0.52/share, on revenue of $116.3m (+24%), beating analysts' average estimate of $0.48/share (Thomson). FactSet's board approved a 100% quarterly dividend increase to $0.12/share and increased its current share repurchase program by $100m. CEO Philip A. Hadley commented, "The dividend increase and additional share repurchase authorization reflect the consistency of our subscription business model, our historical free cash flow and our continued focus to enhance long-term shareholder value." FactSet forecasts Q3 revenue between $118m - $121m. Shares of FactSet lost 2.82% to $64.70 yesterday and have traded between $41.20 - $66.95 [all-time high] over the past year.
Sources: Press release, MarketWatch
Commentary: Why 'Insider Selling' Can be Misleading: Factset Shares Fall on Nonsense [Jun. '06] • Recommending Factset to Play the Investment Banking Game [Feb. '06]
Stocks/ETFs to watch: FactSet Research Systems (FDS). Competitors: Reuters Group plc (RTRSY), Thomson Corp. (TOC)
Affiliated Computer Services Receives Buyout Offer from Founder, Cerebus
Affiliated Computer Services Inc. announced this morning it has received a buyout offer from its founder, Darwin Deason, and private-equity fund Cerebus Capital Management. The offer of $59.25/share -- a 16% premium on Monday's closing price of $51.29 -- values the company at about $6 billion, and $8.2 billion including debt that would either be refinanced or remain outstanding. According to the Wall Street Journal, in 2005 a group of private-equity funds almost bought ACS, but the deal was thwarted by Deason. Affiliated later became caught up in the options-backdating scandal, although Deason has not been implicated to date. Deason owns 40% of all outstanding shares, and holds supervoting control over a second class of stock, which gives him the ability to control the company's fate. The people said that Deason would entertain higher offers. Citigroup is funding the deal, and has issued a "highly confident" letter that it will raise the necessary financing. Deason: "I believe that this offer and our proposed process will maximize value for all of ACS's shareholders." He said he would continue as Executive Chairman. ACS shares are up 16.4% to $59.70 in pre-market trading.
Sources: Press Release, Wall Street Journal, MarketWatch
Commentary: Good News? Top Affiliated Computer Execs Resign Over Options Flap
Stocks/ETFs to watch: Affiliated Computer Services Inc. (ACS). Competitors: Accenture Ltd. (ACN), Computer Sciences Corp. (CSC), Electronic Data Systems Corp. (EDS)
Conference call transcript: Affiliated Computer Services F2Q07 (Qtr End 1/31/07) Earnings Call Transcript
Martek's Unusual Accounting Methods May Exaggerate Profits - WSJ
In its Heard on the Street column, the Wall Street Journal reports that food-additive developer Martek Biosciences Corp. may be 'cooking the books' by using unconventional accounting methods that make its earnings appear stronger than they actually are. In its FQ1 earnings report, the company noted that $94.3 million of its assets (1/3 of its total assets) are being "held for future use," and therefore are not subject to depreciation. Martek said its policies are in accordance with GAAP and fully disclosed. But the approach is 'pretty rare' -- companies usually depreciate assets that they are or could be using. According to independent sources, the unorthodox accounting methods could boost 2007 net profits by almost $4 million, or about 20%, and accounts for its 30x P/E multiple that would be a richer 37x at full depreciation. Accounting rules don't directly address 'temporarily idle' assets and their depreciation, except to say that they should not be considered abandoned: There isn't much "specific guidance" on the issue, CFO Peter Buzy said. But even if there isn't a "bright-line rule, the principle is clear: Once assets are ready for their intended use, companies should begin recognizing all expenses normally associated with them," said accounting research firm Glass, Lewis & Co. Buzy conceded that a potential impairment of its idle assets could lead to a write-off against profits down the line.
Sources: Wall Street Journal
Commentary: Martek Bioscience -- Premium-Priced • My Martek Biosciences Call Option Misplay • Jim Cramer's Take on MATK
Stocks/ETFs to watch: Martek Biosciences Corp. (MATK)
Acadia Shares Double On Phase II Schizophrenia Treatment Success
Acadia Pharmaceuticals shareholders got a strong dose of good news yesterday, when the company announced its ACP-103 schizophrenia treatment showed effectiveness in its Phase II trials. Shares shot up $6.92, or 103.44%, to $13.61 on the news. The company reported that when combined with other antipsychotic treatments, the trial showed a statistically significant level of efficacy as well as reduced negative side effects, including "a faster onset of antipsychotic action and 50% less weight gain,” according to Uli Hacksell, Acadia's CEO. According to Caancord analyst Jose Pantginis, "Acadia is such a small company, that even if it gets a sliver of that $13 to $14 billion [antipsychotic meds] pie, the impact to its bottom line would be huge."
Sources: ACADIA Announces Positive Results From ACP-103 Phase II Schizophrenia Co-Therapy Trial">Press Release, Forbes, MarketWatch, Reuters
Commentary: Acadia Jumps On Schizophrenia Drug Data • Biotech Day in Review: AtheroGenics Tumbles on Drug Test Failure
Stocks/ETFs to watch: Acadia Pharmaceuticals Inc. (ACAD). Competitors: Allergan (AGN), Johnson & Johnson (JNJ), Pfizer Inc. (PFE), Merck & Co. (MRK), Eli Lilly & Co. (LLY)
Seeking Alpha's news summaries are combined into a pre-market briefing called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only a few seconds to sign up.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise for a Second Day; Toyota, Honda Advance on Weaker Yen Asian stocks rose, driven by the biggest two-day gain in the Nikkei 225 Stock Average this year.
• Hutchison Telecom Has Fourth-Quarter Profit on Rising India, Israel Sales Hutchison Telecommunications International Ltd. (HTX), a mobile-phone operator controlled by billionaire Li Ka-shing, reported its first annual profit since listing in 2004 as sales rose in India and Israel.
• China Bans Companies From Investing Share-Sale Proceeds in Stock Market China's securities regulator barred companies from using proceeds from share sales to invest in stocks, in an attempt to damp overheating financial markets.
• Ranbaxy Shares Rise on Report Company Opts Out of Bidding for Merck Unit Shares of Ranbaxy Laboratories Ltd., India's biggest drugmaker, jumped 6.2 percent on a report the company pulled out of the bidding for Merck KGaA's generic- medicines unit because the price was too high.
European Headlines (via Bloomberg.com)
• European Stocks Drop, Led by Saint-Gobain, ASML, Suedzucker, Deutsche Post European stocks fell for the first time in four days as concern that economic growth is slowing in the U.S. outweighed speculation that takeovers will increase.
• U.K. Inflation Unexpectedly Accelerates to Second-Fastest Pace in Decade U.K. inflation unexpectedly accelerated in February to the second-fastest pace in a decade, strengthening the case for a further interest-rate increase from the Bank of England.
• Virgin, BSkyB Clash Prompts Pay-Television Investigation by U.K. Regulator The clash between Rupert Murdoch's British Sky Broadcasting Group Plc (BSY) and Virgin Media Inc. (VMED), in which Richard Branson is the biggest owner, for dominance of U.K. pay television prompted regulators to investigate the industry.
• Whitbread Shares Jump by Most in 15 Years on Talk of $8.8 Billion Buyout Shares of Whitbread Plc, the U.K. owner of the Premier Travel Inn budget lodging chain, had their biggest intraday gain in 15 years on speculation the company may get a takeover bid worth about 4.5 billion pounds ($8.8 billion).
• Cinven May Seek $1.7 Billion Sale of German Plastic-Wrap Maker, People Say Cinven Ltd., manager of a 6.5 billion- euro ($8.6 billion) buyout fund, is considering the sale of Kloeckner Pentaplast SA, the German maker of plastic wrappers it bought five years ago, two people with knowledge of the plan said.