Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -1.00; 1,444.30
NASDAQ 100: -0.75; 1,817.50
Dow: -7.00; 12,526.00
NIKKEI 225: -0.90%; 17,365.05 (-156.91)
HANG SENG: -0.30%; 19,706.79 (-59.06)
S&P/ASX 200: -0.44%; 5,964.20 (-26.50)
BSE SENSEX 30: 13,124.32 (03/26)
FTSE 100: +0.19%; 6,303.60 (+11.70)
CAC 40: +0.34%; 5,595.40 (+19.10)
XETRA-DAX: +0.64%; 6,872.31 (+43.49)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.62%; $62.52 (-$0.39)
Gold: +0.05%; $664.20 (+$0.30)
Natural Gas: -0.23%; $7.24 (-$0.02)
Silver: -0.15%; $13.39 (-$0.02)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Lennar's Profit Takes a 73% Hit; Shares Lower
Lennar Corporation reported its net earnings fell 73% during 1Q07 as demand for new houses continued to fall in the midst of the worst housing slump since 1990. The biggest homebuilder in terms of revenue, EPS came in at just $0.43 ($68.6 million) versus a year-ago EPS figure of $1.58 ($258.1 million). In addition, CEO Stuart Miller said "Given the state of the market, we do not expect to achieve our previously stated 2007 profit goal," adding "We are not comfortable providing a new earnings goal at this time." Among the causes for the homebuilder slump are a housing inventory glut, which has not yet been worked down successfully and now, increasing foreclosures in the sub-prime mortgage market which is adding even more homes to the market. Lennar said on Jan. 17 that FY2007 earnings would at least match 2006's profit of $593.9 million, or $3.69 a share. Overall revenue dropped to $2.79 billion from $3.24 billion; revenue from home sales fell 10% to $2.62 billion. Thomson Financial analysts were expecting EPS of $0.43 on revenue of just $2.49 billion. Shares are lower by $1.49, or 3.35%, to $43.05 in pre-market action.
Sources: Bloomberg, MarketWatch, Reuters, TheStreet.com
Commentary: Is It Time to Buy the Homebuilders? 13 Stocks to Consider • Earnings Preview: Three Companies That Could Surprise This Week • New Home Sales Drop for Second Month Straight
Stocks/ETFs to watch: Lennar Corporation (LEN). Competitors: KB Home (KBH), D.R. Horton Inc. (DHI), Pulte Homes Inc. (PHM), Standard Pacific Corp. (SPF). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB)
McCormick Beats Estimates, Affirms FY Guidance at High End
Spice maker McCormick & Co reported record Q1 earnings as net income tripled to $44.2 million, or $0.33/share (prior period earnings impacted more heavily by restructuring charges), on revenue growth of 7% to $652.6m, beating analysts' average estimates of $0.31/share on sales of $643m. CEO Robert J. Lawless commented, "The restructuring actions begun in late 2005 are delivering significant cost savings and sustainable margin improvement. Initiatives to grow our business are driving sales in a number of our regions around the world. This added up to an outstanding quarter and gives us increased confidence that 2007 will be another record year for McCormick." Based on its "outstanding" Q1 results, McCormick says full year EPS is likely to come in at the upper end of its $1.67 - $1.71 projection. Shares of McCormick lost 0.2% to $39.11 yesterday. It has traded between $32.22 - $39.82 over the past year.
Sources: Press release, MarketWatch
Commentary: McCormick's Curries Favor With Investors • McCormick May Purchase Indian Spice Company [Dec. '06]
Stocks/ETFs to watch: McCormick (MKC). Competitors: International Flavors & Fragrances (IFF)
Vodafone's Hutchison Essar Bid Hits Regulatory Snags
According to a report in the Economic Times, Vodafone Group's planned buyout of India's Hutchison Essar may be delayed by regulatory snags. Foreign ownership of telecom companies in India may not exceed 74%. Hutchison Essar has agreed to sell its 67% stake in the company jointly owned with India's Essar Group, who own the rest. Two-thirds Essar Group in turn is held through an offshore unit, which is also considered foreign ownership. The regulatory inquiry seems to hinge on a 12.26% stake held by Hutchison Essar CEO Asim Ghosh and investor Analjit Singh -- and on whether Hutchison Telecom was the beneficial owner of that stake. Vodafone said it sees "no big surprise" in the move, and said it is not looking to acquire its interest through any backdoor. Arun Sarin, Vodafone CEO, said to a group of journalists: "We think we are in compliance... At the end of the day, I want the FIPB (Foreign Investment Promotion Board), the Finance Ministry, the Ministry of Communications, the Minister of Industry and the Prime Minister to say that you are welcome here. The last thing we want to do is to show up there (India) and allow some people to say... Are you coming into India through back door or side door?"
Sources: Reuters, Hindu Business Line
Commentary: Vodafone Makes Smart Move In India • Vodafone In Booming Indian Wireless: Tread Carefully • Vodafone's Sarin Is Losing The Plot
Stocks/ETFs to watch: Vodafone Group plc (VOD), Hutchison Telecommunications International (HTX)
Best Buy to Acquire VoIP and IP Provider Speakeasy for $97 Million
Best Buy Co. said this morning it has agreed to acquire Speakeasy, Inc., one of the largest independent broadband voice, data and IT service providers in the United States, for about $97 million -- 1.2x Speakeasy's 2006 revenue of $80 million. Best Buy said Speakeasy would strengthen its technology portfolio, towards achieving its goal of helping small businesses grow or operate more efficiently through technology. Best Buy CFO Darren Jackson: "By joining forces with Speakeasy, a company with a true passion for helping entrepreneurs run their businesses, we are making technology more accessible to small businesses by creating a single source for their IT needs." Speakeasy lines include business-class broadband and VoIP, a popular choice for small businesses who seek efficient and cost-effective telecommunication solutions. According to the press release, customers 'rave about the personalized support' they receive from Speakeasy's customer service team. Speakeasy's services are available in most metropolitan areas within the U.S. Best Buy expects to close the deal in its FQ1 2008.
Sources: Press Release, MarketWatch
Commentary: Poker Face: Best Buy Plays the Web Pricing Game • Best Buy, Circuit City Surprise Analysts with Strong Sales • Barron's Stocks for a Wealthy America
Stocks/ETFs to watch: Best Buy Co. Inc. (BBY). Competitors: Circuit City Stores Inc. (CC), RadioShack Corp. (RSH), GameStop Corp. (GME), Staples Inc. (SPLS). ETFs: Consumer Discretionary SPDR ETF (XLY), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
Conference call transcript: Best Buy F3Q07 (Qtr End 11/25/06) Earnings Call Transcript
Sony Ericsson to Target Lower-end Cell Phone Segment
Sony Ericsson and France's Sagem Communication (of SAFRAN Group) announced licensing and ODM agreements for entry-level GSM, GPRS & EDGE mobile phones. This is an interesting move for Sony Ericsson, as it has become a force in the mid-range market, achieving record earnings in 2006. Sagem will license certain hardware and software technologies to Sony Ericsson and provide it with "Sony Ericsson" branded mobile phones. In a press release, Sony Ericsson said it will establish a unit specifically for developing entry-level phones. A Sony Ericsson executive commented, "Our co-operation with Sagem Communication will allow us to offer a mature range of phones right from the start." An executive at Sagem called the agreement "long-term." MarketWatch reports Sony Ericsson's spokesman told Dow Jones Newswires the phones will be priced between 50 - 100 euros -- far from the very bottom of the market -- adding that "... operator customers are asking for phones in this entry, lower tier of the market."
Sources: Press release, MarketWatch
Commentary: Sony Ericsson Triples Profits in 4Q06 • Ericsson's Growing Emerging Market Success Should Leave Motorola Trailing Behind • Sony Ericsson Sees Opportunity in Mobile TV
Stocks/ETFs to watch: Ericsson (ERIC), Sony (SNE), SAFRAN (Paris: SAF). Competitors: Motorola (MOT), Nokia (NOK), Samsung [see iShares MSCI S. Korea (EWY)]. ETFs: Wireless HOLDRS (WMH)
New General Public License To Challenge Microsoft-Novell Linux Deal
The Free Software Foundation [FSL], a non-profit group which owns most of the rights to the Linux operating system, will unveil the latest version of the General Public License [GPL] Wednesday morning at 7 AM PDT. In its current form, GPL 2 governs rights and restrictions for many open-source and free-ware programs including Linux kernel, Java and MySQL database. The new license is aimed at undermining a deal inked between Microsoft and Linux support provider Novell in November, which implied that Microsoft has legal rights to Linux, according to some. Peter Brown, executive director of the FSL told Reuters yesterday, "We need to make sure such deals don't make a mockery of the goals of free software." According to details of the deal reported by the Wall Street Journal in November, Microsoft will be paying Novell, "for a minimum of roughly 70,000 'coupons' that Microsoft customers can convert into annual subscriptions to receive support." Microsoft's proprietary software code is generally closed to programmers and independent software engineers, unlike Linux code which is open to the general public.
Sources: Reuters, CNet
Commentary: In Recognition of New "Mixed" Software Environment, Microsoft To Work With Novell's Linux • Novell Steering Microsoft Defectors Back to Microsoft? • Novell Profiting From Microsoft's Linux Foray
Stocks/ETFs to watch: Microsoft (MSFT), Novell (NOVL). Competitors: Red Hat (Red Hat), Oracle (ORCL), Apple (AAPL). ETFs: iShares Goldman Sachs Software Index (IGV), PowerShares Dynamic Software (PSJ)
Related: Free Software Foundation
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Slide, Led by Sony, Samsung, After U.S. New-Home Sales Drop Asian stocks fell for the first time in four days led by exporters after new-home sales in the U.S. unexpectedly dropped, adding to concern growth in the world's biggest economy is slowing.
• Citigroup Trader Gave Misleading, Dishonest Answer, Australian Court Told A Citigroup Inc. (C) employee who traded Patrick Corp. stock on the bank's account lied about his reasons for selling the shares, Australia's federal court was told today.
• Henderson Land to Buy $1.55 Billion of Real Estate, Hotel Assets From Unit Henderson Land Development Co., a builder controlled by Hong Kong billionaire Lee Shau-kee, will buy assets from its unit Henderson Investment Ltd. for as much as HK$12.1 billion ($1.55 billion).
• Baht Falls as Bank of Thailand Suggests Lenders Sell Currency, Buy Dollars The Thai baht dropped against the dollar, extending its slide from a nine-year high, after the Bank of Thailand suggested domestic lenders sell the currency.
European Headlines (via Bloomberg.com)
• German Business Optimism Unexpectedly Rose in March as Tax Concern Waned German business confidence unexpectedly rose in March, a sign Europe's largest economy has overcome a sales-tax increase and can withstand a U.S. slowdown.
• Barclays' Diamond Says He's `Very Confident' About ABN Amro Merger Talks Barclays Plc (BCS) President Robert Diamond said he is ``very confident'' about the U.K. company's talks to buy ABN Amro Holding NV (ABN), the biggest Dutch bank.
• European Auto Stocks Rise on Takeover Speculation; DaimlerChrysler Gains European auto stocks, this year's best performers, advanced on speculation industry takeovers will increase. Benchmarks in the region were little changed.
• EDP to Buy Horizon Wind for $2.15 Billion to Gain Renewable Power in U.S. EDP-Energias de Portugal SA (EDP), the country's biggest electricity utility, agreed to buy Horizon Wind Energy LLC of Texas for $2.15 billion to more than double its worldwide wind-power production.
• European Central Bank Interest Rates Might Not Have Peaked, Garganas Says European Central Bank council member Nicholas Garganas indicated the bank may not be finished raising interest rates in the 13-nation euro region.