Manufacturing Bounces Back; Pending Home Sales Decline
The Institute for Supply Management's index of manufacturing activity rose to a higher-than-expected 54.7 in April from 50.9 in March, its fastest pace in nearly a year, as order figures and production improved. Any reading over 50 is considered an expansion indicator. Economists had been expecting a reading of 51. Factories may now be in a position to boost production after containing inventories over the past two quarters. If the factory sector is indeed emerging from a period of weakness, analysts believe it should help the overall economy withstand pressure from the slumping housing sector. Exports are being strongly boosted by European and Asian demand combined with a weak dollar. New orders swelled to 58.5 in April from 51.6 in March, the fifth monthly gain in a row; inventories fell to 46.3 in April from 47.5 in March, the ninth consecutive drop. Meanwhile, the National Association of Realtors said pending home sales in March fell 4.9% from February to 104.3, their lowest point in four years. Home sales in April may thus be weak, leaving excess inventory on the market and forcing production constraints.
Sources: ISM press release, NAR press release Wall Street Journal, Bloomberg, Reuters, Forbes
Commentary: Removing Housing from GDP • Housing Bubble and Real Estate Market Tracker
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG), streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (NYSEARCA:ITB)
Vonage Requests Lower Court Retrial, Cites Supreme Court Patent Decision
Vonage has asked the U.S. Court of Appeals for the Federal Circuit in Washington D.C. "to vacate and remand" the U.S. District Court's finding of the company's infringement on certain Verizon patents. It cited the U.S. Supreme Court's unanimous decision Monday, establishing a new test for determining when an invention is too obvious to warrant patent protection. "The Supreme Court's decision should have positive implications for Vonage and our pending patent litigation with Verizon," said Jeffrey Citron, Vonage chairman and interim CEO. Verizon's deputy general counsel however, said "there is no merit" to Vonage's request, calling it "a delaying tactic to avoid final resolution of the appeal." The Wall Street Journal reports Vonage has "... mounted an aggressive public relations campaign in recent days to suggest Verizon's motivation is to stamp out competition, rather than protect its intellectual property." Shares of Vonage rose 2.3% to $3.14 in normal trading and gained 1.6% to $3.19 in the after-hours on light volume under 50,000 shares.
Sources: Press release, Bloomberg, The Wall Street Journal
Commentary: Vonage Wins Stay of Injunction, May Continue Pursuing New Customers; Shares Gain 29% • Vonage Blues May Be Spreading To Clearwire • Verizon/Vonage Patent Infringement Suit: Does 3Com Actually Own the Deed? • Supreme Court Sides with Innovators Over Patent Holders
Stocks/ETFs to watch: Vonage Holdings Corp. (NYSE:VG), Verizon Communications Inc. (NYSE:VZ). Competitors: Sprint Nextel Corp. (NYSE:S), Qwest Communications International Inc. (NYSE:Q), AT&T Inc. (NYSE:T), Charter Communications (NASDAQ:CHTR), Comcast (NASDAQ:CMCSA).
Related: Vonage filing [pdf]
Nortel Guides Revenues Higher
Nortel Networks said it expects Q1 revenue to come in at $2.48 billion, higher than a previously expected $2.37 billion. The announcement came ahead of Wednesday's scheduled annual shareholder meeting. It also expects gross margin of 40% and a slightly negative operating margin, but 6.4% better than last year's. It reaffirmed full-year revenue forecasts of $11.3 billion, and announced David Drinkwater would take over as interim CFO replacing Peter Currie, who resigned on Monday. Shares were up as high as 2.3% in after-hours trading.
Sources: Press release, TheStreet.com
Commentary: Nortel News: U.S. WiMax Deal, Going Green, Analyst Downgrade • Nortel, Cisco: The SMB Battle is Just Beginning • Nortel: Recent 24% Sell Off Makes The Stock “A Solid Value Pick”
Stocks/ETFs to watch: Nortel Networks Corp. (NT). Competitors: Alcatel-Lucent ADR (ALU), Juniper Networks Inc. (NYSE:JNPR), Cisco Systems Inc. (NASDAQ:CSCO), Siemens AG (SI), Motorola Inc. (MOT). ETFs: HOLDRS Broadband (NYSE:BDH), iShares Goldman Sachs Network Index Fund (NYSEARCA:IGN), streetTRACKS Morgan Stanley Technology Index Fund (NYSEARCA:MTK)
Conference call transcript: Nortel Networks Q4 2006
DivX Shares Tumble on Earnings Miss
DivX Inc. reported Q1 income of $3.66 million ($0.10/share), short of analyst estimates of $0.14. Revenue of $20.2 million was up from $14.1 million last year on strong gains in technology licensing, beating Street expectations of $19.8 million. For Q2 the company forecasts $16.7-18.7 million in revenue; analysts are calling for $18.2 million. DivX creates and licenses video compression and decompression technology. Gross margins were about 95%. Stock-based compensation went from $366,000 last year to $944,000. CEO Jordan Greenhall said, "The media world is in the earliest stages of a digital revolution, and we believe DivX is well-positioned to play a significant role as the future of the industry takes shape." Shares dropped 14.7% to $17.06 in after-hours trading.
Sources: Press release, San Diego Business Journal, MarketWatch
Commentary: A Year In Rewind - DivX’s Past And Present CE Partners • Why Is Adobe - Not DivX - Leading the Internet Video Market? • DivX May Be About To Break Out
Stocks/ETFs to watch: DivX Inc. (DIVX). Competitors: Adobe Systems Inc. (NASDAQ:ADBE), Apple Computer Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT)
Affiliated Computer Services Beats Street; Committee Reviewing Sweetened Offer
Affiliated Computer Services reported fiscal Q3 net income increased 6.5% to $82.1 million, or $0.82/share, topping the Street's estimate of $0.80. Sales grew 9.6% to $1.44b, in-line with analysts' forecast. Affiliated founder Darwin Deason and Cerberus Capital Management LP sweetened their offer on April 21 to take the company private for $6.21b ($62/share) -- from $59.25, previously bid on Mar. 20. Affiliated announced a special committee has been formed by the board of directors to evaluate the company's strategic alternatives, including the raised bid. Shares of Affiliated closed unchanged yesterday at $59.91. It has traded in a range of $46.50 - $61.67 over the past 52-weeks, having rallied this year on the possibility of a takeover, after falling 17% in 2006 due to a backdated stock options investigation.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Affiliated Computer Services Receives Buyout Offer from Founder, Cerberus • Post 9-11 Backdating Issues: The War at Home • Affiliated Computer Services Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Affiliated Computer Services Inc. (ACS). Competitors: Accenture Ltd. (NYSE:ACN), Computer Sciences Corp. (NYSE:CSC), Electronic Data Systems Corp. (NASDAQ:EDS)
Icahn Publishes Open Letter in Bid for Motorola Board Seat; CEO Zander Responds
Activist investor Carl Icahn published a full-page ad in Tuesday's Wall Street Journal urging Motorola shareholders to vote him onto the company's board of directors at their May 7 annual meeting. Motorola CEO Ed Zander responded with a letter to employees and shareholders in which he opposes Icahn's nomination. Icahn, who controls 2.9% of Motorola stock, maintains that responsibility for the 23% drop in the "troubled" company's share price over the past six months lies with management and the board. His letter rebuked CEO Ed Zander for apparently flippant remarks about the company's customers, but did not provide details on how he plans to improve profit margins and return cash to shareholders, goals he has stated in the past. Zander's letter encouraged employees to focus on serving customers even as Icahn "paint[s] Motorola in an unfavorable light" and urged shareholders to nix Icahn's bid for a board seat. Zander wrote that in addition to being too committed elsewhere, Icahn has responsibilities to his hedge-fund investors that would place him in a conflict of interest with Motorola shareholders. In the most recent quarter, Motorola posted a loss and its first sales drop in four years as it lost market share to Nokia and Samsung.
Sources: Carl Icahn's letter to Motorola shareholders, Motorola CEO Ed Zander's letter to employees and shareholders, Bloomberg, Wall Street Journal
Commentary: Previous News Briefs on Icahn/Motorola Conflict • Analysts Believe Motorola Hasn't Yet Hit Bottom • Motorola: Not a Bet We're Lining Up To Make
Stocks/ETFs to watch: Motorola, Inc. (MOT). Competitors: LM Ericsson Telephone Co. (NASDAQ:ERIC), Nokia Corp. (NYSE:NOK). ETFs: Broadband HOLDRs (BDH), Wireless HOLDRs (NYSEARCA:WMH), PowerShares FTSE RAFI Telecom & Tech (PRFQ)
Conference call transcripts: Motorola Q1 2007
News Corp. Offers $60/Share for Dow Jones
Dow Jones & Company shares traded up 55% to $56.20 after News Corp. made an unsolicited buyout bid of $60/share that was confirmed by Dow Jones in a press release. News Corp., controlled by Rupert Murdoch, proposed the acquisition in a letter to the Dow Jones board two weeks ago. The Bancroft family, which controls Dow Jones with about 62% of voting stock, has hired advisors to help them weigh their options. In its statement Dow Jones said "there can be no assurance that this evaluation will lead to any transaction." New York Daily News publisher Mort Zuckerman called the offer a "brilliant move." Murdoch, it is said, wants to incorporate Dow Jones into his media empire. News Corp. is expected to begin a business news channel, Fox Business, to compete with CNBC later this year. Wall Street Journal says the offer "could set off a bidding war for Dow Jones... Possible rival suitors include the Washington Post Co., the New York Times Co. and possibly even Bloomberg LP." News Corp. shares were down 4.2% to $22.99.
Sources: Press release, CNBC, MarketWatch, Bloomberg
Commentary: Murdoch To Buy Dow Jones? • Dow Jones Capitalizing on the Changing Media Market • Holy Cow! News Corp. Lobs Hostile Bid for Dow Jones [IP & Democracy] • News Corp. Offers $5 Billion For Wall Street Journal [WIRED Blog]
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NASDAQ:NWS)
Earnings call transcripts: Dow Jones Q1 2007, News Corporation F2Q07
Related: Video: Cramer on News Corp's Dow Jones Bid [CNBC], News Corp. Business Channel to Launch in fall, Murdoch Says [CNBC]
Bancroft Family Will Vote Against News Corp. Bid
In a news release on its website, Dow Jones & Company said a representative of the Bancroft family (Michael B. Elefante) has informed its Board of Directors that "members of the family and the trustees of trusts for their benefit have advised him that they will vote shares constituting slightly more than 50% of the outstanding voting power of Dow Jones... against the proposal submitted by News Corporation to acquire all of the outstanding shares of Dow Jones common stock and Class B common stock for $60.00 per share." Dow Jones said its Board would factor this information into its evaluation. Wall Street Journal says it isn't clear whether the block is opposed to the offer or if it's simply trying to get Rupert Murdoch's News Corp. to sweeten its bid -- which is roughly 67% higher than shares' pre-bid value. The Bancroft family owns 24.7% of the outstanding shares, but 64.2% of the voting stock through supervoting shares. Dow Jones has been quick to dismiss previous approaches to sell. This time the offer, which was made in a letter prior to the company's April 18 annual meeting, has merited the family's contemplation; in a statement Dow Jones said members of the family were "evaluating the proposal." News Corp. confirmed its proposal, calling it a "friendly offer and that we believe The Wall Street Journal is one of the world's great newspapers with the best digital presence."
Sources: Press release, Wall Street Journal
Commentary: News Corp. Offers $60/Share for Dow Jones • Newspaper Stocks Climb on Dow Jones Bid • May Day, May Day: Dow Jones Under Attack By News Corp.
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NWS). Competitors: Gannett Co. Inc. (NYSE:GCI), The New York Times Co. (NYSE:NYT), Washington Post Co. (WPO), Pearson plc (NYSE:PSO), Reuters Group plc (RTRSY), Lee Enterprises Inc. (NYSE:LEE), McClatchy Company (NYSE:MNI)
Related: Video: Cramer on News Corp's Dow Jones Bid [CNBC], News Corp. Business Channel to Launch in fall, Murdoch Says [CNBC]
Getty Images Net Lower, But Beats Estimates
Getty Images reported preliminary Q1 net income of $38 million, or $0.63/share, a 3.5% decline from the same period last year. Excluding certain items, EPS totaled $0.68, beating analysts' average estimate of $0.62. Revenues rose 5.8% to $212.7m, also beating the Street's estimate ($209.6m). Getty issued a preliminary earnings release due to a pending restatement related to backdated stock options, which would primarily be expensed to 2002 at around $28m - $32m. Shares of Getty fell 0.9% to $51.52 during normal trading, but last traded up 2% to $52.55 in the after-hours, on light volume of just over 30,000 shares. For the current quarter, Getty forecast EPS of $0.58 (or $0.66 excluding certain items including costs from the acquisition of WireImage) on sales of approximately $218m. Analysts on average expect EPS of $0.66 on sales of $213.7m. For the full year, Getty said it expects EPS of $2.47 (or $2.64 excluding certain items) on sales of around $880m.
Sources: Getty Images Q1'07 Earnings Call Transcript, Press release [pdf], Bloomberg
Commentary: The Future Of Image Search Is In Social Search • Getty Images: No Compelling Argument for Rich Valuation • Getty Images: A Stock To Avoid
Stocks/ETFs to watch: Getty Images (GYI). Competitors: Jupitermedia (JUPM), Reuters Group (RTRSY)
Blockbuster Sells Off Game Station Unit to Focus on Movies
Blockbuster Inc., the #1 U.S. movie chain, sold its UK game retail unit, Game Station, to British-based Game Group plc for $150 million in cash. The sale is part of the company's effort to divest non-core and foreign assets in order to focus on domestic success. The sale "underscores our intent to focus on our Blockbuster-branded assets in North America in support of our goal to grow our overall share of the video rental market, both in-store and online," CEO John Antioco said. Blockbuster said it intends to use of the bulk of the sale's proceeds to pay down debt -- which stood at $984 million at the end of 2006. During 2006, Blockbuster completed the divestiture of its Movie Trading Co. locations and Movie Brands Inc. subsidiary, left Spain, and sold its Taiwan subsidiary. More recently Blockbuster sold its U.S.-based Rhino Video Games chain and entered into an agreement to sell its Australian subsidiary. Blockbuster shares are up 17.4% in 2007 after gaining 39% in 2006.
Sources: Press release, Reuters
Commentary: Netflix, Blockbuster: Time for the Online Rental Wars? • Blockbuster's Online Focus is Killing its Competitive Advantage • Flixster: Blockbuster/Netflix's Holy Grail?
Stocks/ETFs to watch: Blockbuster Inc. (BBI). Competitors: Netflix Inc. (NASDAQ:NFLX), Movie Gallery Inc. (MOVI), GameStop Corp. (NYSE:GME). ETFs: PowerShares Dyn Leisure & Entertainment ETF (NYSEARCA:PEJ)
Conference call transcript: Blockbuster Q4 2006
Dolans Try Again to Take Cablevision Private
The Dolan family, rebuffed several times before, are trying once again to take Cablevision private -- and this time, talks appear to be advancing. In 2005, the Dolans, who founded the company and hold a controlling interest, tried and failed to take the core company private and spin off the Rainbow subsidiary, which owns several sports teams, TV networks, and the venue Madison Square Garden. In October 2006, the family made an all-cash, $7.9-billion offer ($27/share), but were rejected by Cablevision's special committee of independent directors. The Dolans raised their bid to $30/share but were again rebuffed. The Dolans' current offer is said to be $36/share, 10% above the shares' market close on Tuesday. The all-cash bid values the company at approximately $10.5 billion and its cable assets at over $5,000 per subscriber, an unusually high figure thought by some analysts to be justified by the subscribers' concentration in a wealthy part of the country. The Cablevision board is meeting to discuss the offer and an announcement could be forthcoming within the next 24 hours.
Sources: Wall Street Journal, Reuters, MarketWatch, MSNBC, Newsday
Commentary: Cablevision Board Rejects New Dolan Family Offer With a Resounding 'No' [January 17, 2007] • Rejection of Upped Dolan Family Bid Likely To Send Cablevision Shares Lower • Is The Dolan Bid For Cablevision Holding Down Its Stock Price?
Stocks/ETFs to watch: Cablevision Systems Corp. (NYSE:CVC). Competitors: Comcast Corp. (CMCSA), DirecTV Group Inc. (DTV). ETFs: Consumer Discretionary SPDR (NYSEARCA:XLY), PowerShares FTSE RAFI Consumer Services (PRFS)
Conference call transcripts: Cablevision Q4 2006
Yum! Beats Street, Raises Guidance Despite Weak U.S. Sales
Yum! Brands reported Q1 profits rose $194 million, or $0.70/share, up 14% from Q1 2006 profits of $170m ($0.59). The Taco Bell, KFC and Pizza Hut restaurant chain owners' revenue rose 7% to $2.22 billion from 2006's $2.09b. Wall Street expected $0.64/share on revenue of $2.15b. Shares rose 2% to $63.12 on Tuesday in response. Yum's 19% EPS growth was led by China, where profits rose 31%, and Yum's international division, up 25%. International growth offset lagging U.S. sales after two highly publicized incidents this year: An E. coli outbreak at several Northeastern Taco Bell restaurants, and a rat infestation at a NYC Taco Bell. U.S. sales dropped 12% -- same-store sales declined 3% at franchises, and 6% at company-owned stores. China same-store sales rose 9% in comparison. Yum raised 2007 guidance from $3.21 to $3.23/share, beating its 10% growth target six years running, and announced 1,000 new international restaurant openings in 2007 to its current 34,692 stores. The company's stock trades at a 17 P/E to 2008e earnings, vs. rivals McDonald's (16.6) and Burger King (18.9).
Sources: Press Release, Forbes, Reuters, MarketWatch, NY Times
Commentary: McDonald's Focuses on Expanded Menu and Convenience in China • Yum Brands: Globalization Driving Growth • Yum! Brands: Satisfy Your Cravings
Stocks/ETFs to watch: Yum! Brands, Inc. (NYSE:YUM), McDonald's Corp. (NYSE:MCD), Burger King Holdings, Inc. (BKC)
Conference call transcripts: Yum! Brands Q4 2006 Earnings Call Transcript Related: http://consumerist.com/consumer/rats/kfc-taco-bell-rats-gone-wild-raw-video-footage-239257.php">Taco Bell Rats in NYC- video • Yum Brands Removes Trans Fat From Its List of Ingredients
TRANSPORT AND AEROSPACE
April U.S. Auto Sales Suffer Worst Decline Since 1998
April saw automakers experience their worst month of U.S. new light vehicle sales since 1998, according to AutoData Corp., which reported the figures Tuesday. On a non-adjusted basis, only Chrysler saw its sales rise, and that by a nearly flat 1.6%, while Asian automakers experienced declines, after months of strong growth. Total light vehicle sales fell 7.6%, to a total of just 1,338,603 vehicles in April, translating to a seasonally adjusted selling pace of 16.27 million vehicles annually, versus 16.69 million a year ago. Ford's sales fell by 13%, while GM's were down just under 10%. As Ford sales analyst George Pipas put it, "there weren't too many highlights on this month's report card." Asia's Big 3 didn't fair any better with Toyota's sales dropping 4.3% on an unadjusted basis (Reuters reported an adjusted figure of nearly 4% growth, its lowest monthly sales growth since 2004). Honda reported a 9% sales decline, while Nissan's sales tanked a whopping 18% y/y. With the exception of Honda, whose shares fell nearly 1% yesterday, the other automaker's all saw share prices rise moderately despite yesterday's report. April's weak sales figures point to the possibility of a more wary U.S. consumer, cutting back on new spending because of rising gasoline prices and falling home values. As a Toyota executive put it, consumers appear "tentative and are exhibiting a wait-and-see attitude." With the consumer playing such a big role in GDP growth over the last year - growth which dropped to multi-years lows recently - April's auto sales may be indicative of a wider economic downturn beginning to take hold.
Sources: Wall Street Journal, CNN Money, Reuters, TheStreet.com
Commentary: Auto Storm Brewing: The Short Case for the Weakest Players • Goldman: Ford's Street-Beating Q1 Not a Sign of Significant Improvements • The Rise of Toyota and the Demise of the American Auto Industry
Stocks/ETFs to watch: General Motors (NYSE:GM), Ford (NYSE:F), DaimlerChrysler (DCX), Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)
Conference call transcripts: Ford Motor Q1 2007 Earnings Call Transcript
Related: Top-20 selling vehicles in U.S. through April • Toyota Becomes World's Top Car Maker
ENERGY AND MATERIALS
BP CEO Quits Ahead of Schedule After Lying in Court
UK oil giant BP said its CEO Lord John Browne stepped down after courts lifted an injunction prohibiting newspapers to publish stories about his relationship with a Canadian man. 59-year-old Browne had been fighting to keep a London tabloid from publishing the story while planning his resignation later this year. Browne initially lied, then later rescinded his lie, admitting he met Jeff Chevalier on the website of an escort agency. Case judge David Eady castigated Browne over the issue, saying, "I am not prepared to make allowances for a 'white lie' told to the court." Browne resigned on news of the court decision and apologized again for lying in court. Chevalier told the paper BP staff helped him set up his own business (which ultimately failed). A BP internal investigation found any help he received was inconsequential. People familiar with the case said its wasn't Browne's personal life that prompted the hasty departure, but rather the revelation of perjury. Steve Thornber of Threadneedle Investments (which owns 1.1% of BP) described the resignation as "outrageous." The company said career BP executive Tony Hayward will take over CEO duties. Hayward is not expected to implement any serious strategy changes, but has said he will focus on safety after a series of serious operational accidents during the past few years. BP shares are down over 12% during the past year, and closed yesterday flat at $67.32.
Sources: BP Appoints Tony Hayward as Chief Executive as Lord Browne Steps Down [press release], Wall Street Journal, TheStreet.com
Commentary: New Leader Designated at BP • BP: Difficult Execution Worries Investors • BP: Trouble On Two Shores
Stocks/ETFs to watch: BP plc (NYSE:BP)
Related: BP First Quarter 2007 Results
Nokia Sued for Breach of Technology Patent
New Zealand-based company Michael S. Sutton Ltd. has filed suit in the U.S. against cellphone manufacturer Nokia for infringement of a data packaging technology patent. The plaintiff claims Nokia is using a messaging applications technology under patent at Sutton. The claim was filed April 30 in the United States District Court for the Eastern District of Texas. "This case was previously filed against Nokia and then voluntarily dismissed by the plaintiff," said a Nokia spokeswoman. "We will analyse the details of the new case...and actively defend the rights of Nokia." Nokia is also locked in a legal battle with Qualcomm over a disputed cross-licensing agreement.
Commentary: Supreme Court Sides with Innovators Over Patent Holders • QUALCOMM Sues Nokia Again as License Contract Set to Expire • A Forensic Accountant's Winners and Losers from Pending Litigation
Stocks/ETFs to watch: Nokia Corp. (NOK). Competitors: Motorola Inc. (MOT), LM Ericsson Telephone Co. (ERIC). ETFs: Wireless HOLDRs (WMH), Morgan Stanley Technology ETF (MTK)
Conference call transcripts: Q1 2007
Credit Suisse Tops Estimates; CEO Grübel Stepping Down Friday
Credit Suisse Group, second largest Swiss Bank, reported a 5% rise in first quarter income Wednesday, topping consensus analyst estimates. Net income rose to 2.73 billion Swiss francs ($2.26 billion), good for EPS of 2.42 francs, while revenue rose 6% to 11.62 billion francs. Analysts had forecast net income of 2.61 billion francs. Credit Suisse exceeded expectations because of a strong quarter for debt underwriting and equity and fixed income trading. The company's wealth management business generated net new assets of 15.2 billion francs. The latest quarter is outgoing CEO Oswald Grübel's last. Friday, former derivatives trader Brady Dougan will take his post, the first American to ever be named CEO of the 151 year-old bank. "I am convinced that under [his] leadership... Credit Suisse will continue to grow and strengthen its profitability," Grübel said in a parting statement.
Sources: Bloomberg, Wall Street Journal, Reuters, MarketWatch
Commentary: Credit Suisse to Initiate $6B Share Buyback • Asset-Backed Insecurities: Containing the Subprime Mortgage Collapse • Global Guru David Herro's Eight International Heavyweights
Stocks/ETFs to watch: Credit Suisse Group (NYSE:CS). Competitors: UBS AG (NYSE:UBS), Deutsche Bank AG (NYSE:DB). ETFs: PowerShares FTSE RAFI Financials Sector Portfolio (PRFF), Financial Select Sector SPDR (NYSEARCA:XLF)
Related: Credit Suisse Investor Relations • 'Copycat Syndrome' - Is There Any Difference Between Swiss Bankers Credit Suisse and UBS? Wall Street Says Yes
NYSE Euronext Shares Down on Rumors of ISE Bid
Shares of NYSE Euronext were down 3.6% in early trading on Wednesday on news the company has entered into a $3 billion syndicated revolving credit facility -- prompting speculation that it might outflank Deutsche Boerse with a rival bid for the International Securities Exchange [ISE]. Deutsche Boerse announced Tuesday it will acquire the ISE for $2.8 billion in cash, or $67.50/share. The German stock exchange operator is eager to consolidate with another exchange after failed attempts to combine with Euronext and the London Stock Exchange, but analysts warn that the lack of apparent cost savings might cause shareholders to nix the deal by voting down a restructuring arrangement through which the purchase would be financed. (Shareholder approval is not required for the purchase itself.) The Deutsche Boerse deal is being done through Eurex, the company's derivatives JV with Swiss exchange SWX. If it goes through, it will create the world's biggest derivatives marketplace. Eurex is taking criticism that the 41% premium it has offered to ISE shares' Friday closing price is too high, but Eurex CEO Andreas Preuss defends the transaction as "a very strong deal with a very strong partner."
Sources: MarketWatch, MoneyCentral, Bloomberg, MSNBC
Commentary: Deutsche Boerse to Acquire International Securities Exchange for $2.8 Billion • Deutsche Borse Snaps Up the ISE: Is a 24 Hour Derivatives Market Next? • ISE Exchange May Get $2.6 Billion Bid from Deutsche Boerse -- WSJ
Stocks/ETFs to watch: International Securities Exchange Inc. (ISE). Competitors: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings (NASDAQ:CME), Nasdaq Stock Market Inc. (NASDAQ:NDAQ), NYSE Euronext (NYSE:NYX), IntercontinentalExchange Inc. (NYSE:ICE). ETFs: PowerShares Dynamic Mid Cap Growth (PWJ), iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), PowerShares Dynamic Aggressive Growth (NYSE:PGZ), KBW Capital Markets ETF (NYSEARCA:KCE)
MetLife Beats Street on Operating EPS
U.S. life insurer MetLife reported late Tuesday that Q1 operating earnings rose beyond analyst expectations. Net earnings came in at $983 million ($1.28/share), up 37% from $714 million ($0.93) a year ago, when results were affected by investment and derivatives losses. Analysts were expecting $1.28. Operating earnings (a measure that excludes investments) were a record $1.08 billion ($1.41/share), up from $1.03 billion ($1.33) last year. This result exceeded Street expectations of $1.29/share. Premiums, fees and other revenue rose 6% to $8.4 billion. The company's shares closed at $65.86. They have gained 26% over the past year, more than twice the gain of the S&P insurance index. Last year, MetLife sold two large New York residential complexes -- Peter Cooper Village and Stuyvestant Town -- for $5.4 billion, after which it reported a $3 billion after-tax gain. Some analysts speculate that more real estate transactions may be forthcoming. Shares rose 0.6% in AH trading to $66.25.
Sources: Press release, CNBC, Reuters, Bloomberg, MarketWatch
Commentary: Tracking Money Flow in Financial Stocks
Stocks/ETFs to watch: MetLife, Inc. (NYSE:MET). Competitors: Prudential Financial Inc. (NYSE:PRU), American International Group, Inc. (NYSE:AIG), Allianz SE (AZ). ETFs: KBW Insurance ETF (NYSEARCA:KIE), iShares Dow Jones US Insurance (NYSEARCA:IAK), Rydex S&P Equal Weight Financials (NYSEARCA:RYF)
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