Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -1.30; 1,445.90
NASDAQ 100: -1.00; 1,813.75
Dow: -12.00; 12,568.00
NIKKEI 225: +1.74%; 17,544.09 (+300.04)
HANG SENG: +1.03%; 20,209.71 (+207.01)
S&P/ASX 200: +1.39%; 6,097.20 (+83.80)
BSE SENSEX 30: +1.28%; 12,786.77 (+162.19)
FTSE 100: -0.14%; 6,357.20 (-8.90)
CAC 40: +0.12%; 5,718.49 (+6.58)
XETRA-DAX: +0.20%; 7,059.96 (+14.40)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.20%; $64.51 (-$0.13)
Gold: +0.30%; $671.70 (+$2.00)
Natural Gas: +0.42%; $7.46 (+$0.03)
Silver: +0.37%; $13.48 (+$0.05)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Best Buy Beats FQ4 Targets, Guides In Line for 2008
Best Buy Co., #1 electronics retailer in the U.S., said Wednesday morning its FQ4 net income rose 16% on a 17% revenue gain, beating analyst consensus estimates. Net income went from $644 million ($1.29/share) in FQ4 2006 to $763 million ($1.55/share). Revenue rose from $10.7 billion to $12.9 billion driven by new and newly acquired stores. On average, analysts had forecast EPS of $1.52 on revenue of $12.7 billion. Same-store sales rose 5.9% -- 4.8% domestically and 14% internationally. Best Buy said same-store sales were better than expected on an increase in the average purchase price. For F2008, the company forecast earnings of $3.10-3.25/share on $39 billion in revenues; analysts are looking for $3.18 and $39.8 billion. The company said it plans to open about 130 stores in the U.S., Canada and China in the coming year; it will invest $800-850 million to do so. Rival Circuit City has been forced to close stores amid waning revenues. Gross margin fell from 25% to 24%, due to an increase in video gaming hardware sales and growth in the online channel, both of which carry lower margins, and promotional discounts on home-theater items. In pre-market trading, shares are up 0.28% to $49.27.
Sources: Press Release, Wall Street Journal, MarketWatch, TheStreet
Commentary: Why There's No Reason to Fear Best Buy • Poker Face: Best Buy Plays the Web Pricing Game • Bank of America Upgrades Best Buy
Stocks/ETFs to watch: Best Buy Co. Inc. (NYSE:BBY). Competitors: Circuit City Stores Inc. (NYSE:CC), RadioShack Corp. (NYSE:RSH), GameStop Corp. (NYSE:GME), Wal-Mart Stores Inc. (NYSE:WMT). ETFs: Consumer Discretionary SPDR ETF (NYSEARCA:XLY), PowerShares Dynamic Consumer Discretionary (NYSEARCA:PEZ), Vanguard Consumer Discretionary VIPERs (NYSEARCA:VCR)
Conference call transcript: Best Buy F3Q07 (Qtr End 11/25/06) Earnings Call Transcript, Best Buy FQ4 Co. Earnings Conference Call Transcript (later today)
Circuit City Calls Its FQ4 Earnings 'Disappointing'
Circuit City Stores said Wednesday morning it lost $12.2 million in FQ4 2007, down from a $141 million profit in FQ4 2006 -- due to the large discounts it had to offer to attract holiday shoppers. EPS dropped from $0.81/share to a loss of $0.07/share -- analyst estimates were for a profit of $0.63/share. Sales revenue rose 1.2% from $3.89 billion to $3.93 billion, below analyst estimates of $4.05 billion. The results include pre-tax charges of $144.6 million related to the impairment of goodwill, store and facility closures, and other restructuring activities. Sales at stores open at least 12 months rose 6%, below the company's forecast of as much as 8%. Same-store sales dropped 0.5% in the period. In its statement, the company admitted disappointment in its growth: "Fourth quarter sales growth was somewhat less than we expected. During the quarter, flat panel television average selling prices were well below the prior year, and our PC hardware business experienced volatility around the Microsoft Windows Vista operating system transition... We are disappointed in our financial performance, which largely reflects the effects of permanent changes in the television category and transitory changes in the PC category." It said as a result it would accelerate its strategy to increase profit margin. In pre-market trading, shares are down 3.2% to $17.80.
Sources: Press Release, Bloomberg, MarketWatch
Commentary: Earnings Preview: Circuit City, Micron Tech Could Post Negative Suprises • Earnings Preview: Circuit City, Micron Tech Could Post Negative Suprises • Circuit City: Turnaround 'Increasingly Elusive'
Stocks/ETFs to watch: Circuit City Stores Inc. (CC). Competitors: Best Buy Co. Inc. (BBY), RadioShack Corp. (RSH), GameStop Corp. (GME), Wal-Mart Stores Inc. (WMT). ETFs: Consumer Discretionary SPDR ETF (XLY), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
Conference call transcript: Circuit City F3Q07 (Qtr End 11/30/06) Earnings Call Transcript, Circuit City Earnings Conference Call Transcript (later today)
Sony Cuts PSP Price in U.S.; Sales of PS3 Fall in U.K.
In an effort to boost its share of the U.S. handheld gaming market, Sony has cut the price of its PlayStation Portable [PSP] Core by 15% to $170. This is still more expensive than Nintendo's DS Lite, which starts at $130 and has been outselling the PSP at home and abroad. The high-end PSP will now sell for $200, instead of $250, but PSP prices in Asia and Europe reportedly will remain unchanged -- at least for now. The PlayStation 3 meanwhile, suffered an 82% drop in its second week in the U.K., according to data gathered by Chart Track. This follows a solid Europe launch, which easily topped PS2 comparisons. In Japan, Nintendo's Wii continues to outsell the PS3 by more than two-to-one, based on data gathered by Enterbrain, a Japanese game magazine publisher. Launch-to-date sales estimates, in spite of a head start for Sony, show the Wii has sold 1.95 million units versus PS3 sales of 812 thousand.
Sources: Associated Press, Bloomberg, GamesIndustry.biz
Commentary: Sony Drops PSP Price: Nominal Upside For Publishers • PlayStation 3 Sales Solid in Europe Debut • Microsoft to Offer 'Elite' Version of Xbox 360
Stocks/ETFs to watch: Sony (NYSE:SNE), Nintendo (OTCPK:NTDOY), Microsoft (NASDAQ:MSFT). Gaming software publishers: Electronic Arts (ERTS), Activision (NASDAQ:ATVI), Konami (NYSE:KNM), Take Two (NASDAQ:TTWO), THQ (THQI)
New Century To Get Interim Approval For Bankruptcy Finance Package
Judge Kevin Carey, who is overseeing New Century Financial Corp.'s bankruptcy filing is granting interim approval for a finance package, which will hopefully preserve the value of the company's business. An interim order for a debtor-in-possession loan will be signed by Judge Carey today. The move is vital for New Century, if it is to be able to sell its various businesses instead of having them liquidated. The Chapter 11 financing may reach as much as $150 million.
Commentary: New Century Financial Begins a New Chapter: 11 • Irvine, California: No Longer the Silicon Valley of Subprime • New Century Financial on Brink of Bankruptcy
Stocks/ETFs to watch: New Century Financial (OTCPK:NEWC). Competitors: Accredited Home Lenders (LEND), Novastar Financial (NFI), Fremont General (FMT)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Advance, Led by Samsung, Toyota on Oil and U.S. Homes Report Asian stocks jumped to a five-week high as lower oil prices and rising U.S. home sales boosted confidence demand in the region's biggest export market will climb.
• China Regulator to Reject Carlyle Bid for Chongqing Bank Stake, People Say Carlyle Group's bid to buy part of Chongqing City Commercial Bank will be rejected as China stiffens opposition to buyout firms on concern they're not adding enough value, three people familiar with the matter said.
• Yen May Plunge to 125 Against Dollar on Carry Trade, Barclays Capital Says The yen will slump 5 percent this quarter, the worst start to a fiscal year since 1989, as Japanese invest more of their savings overseas, said Toru Umemoto, chief foreign-exchange strategist at Barclays Capital.
• Coles Shares Surge on Speculation $16 Billion Wesfarmers Offer is Too Low Shares of Coles Group Ltd., the target of Australia's largest takeover, surged on speculation Kohlberg, Kravis, Roberts & Co. will top Wesfarmers Ltd.'s A$19.7 billion ($16 billion) offer for the supermarket chain.
European Headlines (via Bloomberg.com)
• European Oil Stocks, BP, Total Drop; Air France, Ryanair, Rio Tinto Climb European energy stocks dropped as oil prices fell, fanning concern that earnings at BP Plc (NYSE:BP) and Total SA (NYSE:TOT) will decline. Benchmarks in the region were little changed.
• Colony Capital Says Carrefour Could Gain $40 Billion by Selling Property Colony Capital LLC founder Thomas Barrack says he wants Carrefour SA to raise as much as 30 billion euros ($40 billion) from property sales, more than what Europe's biggest retailer says its real-estate assets are worth.
• Moody's May Cut Credit Ratings on ABN, ING, Fortis to Restore Confidence Moody's Investors Service (NYSE:MCO) may lower credit ratings on 46 banks including units of ABN Amro Holding NV (ABN), ING Groep NV (NYSE:ING) and Fortis as it seeks to restore confidence in a new system assessing financial institutions.
• Eni Wins Yukos Auction, Agrees to Share Russian Oil Assets With Gazprom Eni SpA (NYSE:E), Italy's state-run oil company, won the auction for a stake in OAO Gazprom's (OTCPK:OGZPY) oil unit, helping the Russian government in its final push to reclaim the assets of jailed billionaire Mikhail Khodorkovsky.