Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: -4.50; 1,509.80
NASDAQ 100: -9.00; 1,897.75
Dow: -40.00; 13,300.00
NIKKEI 225: -0.07%; 17,656.84 (-12.99)
HANG SENG: -0.91%; 20,706.35 (-190.29)
S&P/ASX 200: -0.49%; 6,304.40 (-31.30)
BSE SENSEX 30: -0.82%; 13,765.46 (-113.79)
FTSE 100: -0.61%; 6,563.20 (-40.50)
CAC 40: -0.70%; 6,029.25 (-42.23)
XETRA-DAX: -1.12%; 7,441.67 (-84.02)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.44%; $61.74 (+$0.27)
Gold: -0.43%; $687.40 (-$3.00)
Natural Gas: -0.82%; $7.72 (-$0.06)
Silver: -0.59%; $13.56 (-$0.08)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
CVS/Caremark Comes Up Short Despite Record Earnings
CVS/Caremark reported record Q1 earnings and sales as the first effects of integrating Caremark appear in its results, but the company came up short of analyst expectations. The pharmacy services provider and #2 U.S. drugstore chain posted earnings of $409 million ($0.43/share -- +24%), on sales of $13.18 billion (+32%). The results included 10 days of Caremark operations; CVS acquired the company on March 22. Analysts were calling for a slightly more optimistic $0.45/share on $13.77 billion. Same-store sales were up 7.5%. Sales were boosted by generic drug demand; generics are more profitable for drug-stores because they allow for a larger profit margin due to their cheaper wholesale cost. Its generic dispensing rate increased 450 basis points to a record 58.2%. Of the 19 analysts tracking the stock over the past year, 16 rate it Buy and three Hold. Shares are up 16.9% YTD, but are trading down 1.7% to $35.50 in pre-market trading.
Sources: Press release, Bloomberg, MarketWatch
Commentary: CVS: Loved By Customers and Investment Banks • CVS Could Be Stronger After Caremark Merger • Jim Cramer's Take on CVS
Stocks/ETFs to watch: CVS Corp. (CVS). Competitors: Express Scripts Inc. (ESRX), Walgreen Comp. (WAG), Rite Aid Corp. (RAD), Wal-Mart Stores Inc. (WMT). ETFs: Retail HOLDRS ETF (RTH), Vanguard Consumer Staples ETF (VDC), HOLDRS Pharmaceutical (PPH)
Conference call transcript: CVS Q4 2006 Earnings Call Transcript
Harrah's Sales Up 13%, but EPS Misses, Shares Down Slightly in Pre-Market
Harrah's Entertainment reported a 1.3% increase in Q1 net income to $185.3 million, or $0.98 per share, but EPS from continuing operations (and adjusted EPS from continuing operations) of $0.88 was lower y/y and missed analysts' average estimate of $0.99. Revenues increased 13% to $2.66b, beating the Street's average estimate of $2.51b. Harrah's agreed in December to be acquired by two private equity firms: Apollo Management LP and TPG Inc. Sales in Las Vegas rose 9% to $898.6m, while sales in Atlantic City increased 11% to $546m. Shares of Harrah's lost 0.55% to $85.21 in normal trading Monday, and last traded down 1% to $84.35 in pre-market activity on thin volume of 1,900 shares.
Sources: Associated Press, Bloomberg, MarketWatch
Commentary: Harrah's Entertainment CIO on Attracting Customers • Harrah's Accepts Private Equity Offer of $90 Per Share • A Quick Guide to the Major Gambling Stocks
Stocks/ETFs to watch: Harrah's Entertainment, Inc. (HET). Competitors: Penn National Gaming Inc. (PENN), Wynn Resorts (WYNN), Boyd Gaming Corporation (BYD), MGM MIRAGE (MGM), Las Vegas Sands Corp. (LVS), Trump Entertainment Resorts (TRMP)
Duke Energy Corp. Misses By a Penny
Duke Energy Corp. reported first quarter earnings fell, as it spun off its natural gas business at the year outset. Net income was $357 million, good for EPS of $0.28 cents per share, versus net of $358 million (EPS of $0.37) in the year earlier period.
However, excluding one-time items, EPS were $0.30 versus $0.21 a year ago. Revenue came in at $3.09 billion, up from $1.62 billion a year earlier. Thomson Financial consensus estimates expected Duke's EPS to be $0.31 on revenue of $3.05 billion. Duke shares have gained 5% so far in 2007, lagging the broader S&P utility index which is up roughly 15%.
Sources: Press Release, Reuters, AP, MarketWatch
Commentary: Investing In a Greenhouse Gas-Regulated World • Duke-Spectra: A Powerful Spinoff • Cramer's Take on DUK
Stocks/ETFs to watch: Duke Energy Corporation (DUK). Competitors: Exelon Corporation (EXC), The Southern Company (SO), American Electric Power Company (AEP), TXU Corporation (TXU). ETFs: Utilities SPDR ETF (XLU), HOLDRS Utilities (UTH), Vanguard Utilities (VPU)
Related: DUK Investor Relations
Marsh & McLennan Misses, Plans $500m Buyback, Shares Down in Pre-Market
Marsh & McLennan reported a 36% decline in Q1 net income to $268 million, or $0.47 per share, due to a one-off gain last year. EPS from continuing operations totaled $0.41 (vs. $0.36 last year), but fell short of the Street's $0.50 estimate. Revenue rose 5.2% to $2.81b, but also missed analysts' forecast ($2.88b). The company's insurance unit, Marsh Inc., recorded a slight decline in revenue to $1.14b (vs. $1.15b), but is expected to see an increase of 3% - 5% for the year. It has struggled since a 2004 lawsuit by Eliot Spitzer, when it paid $850 in a settlement without admitting or denying wrongdoing. Marsh & McLennan announced a $500m share buyback, which it says it "expects to execute promptly." It will close its $3.9b sale of Putnam Investments to Canada's Great-West Lifeco later this year. Shares of Marsh lost 0.6% to $31.93 in normal trading Monday and last traded 5.3% lower to $30.25 in pre-market trading on volume over 56,000.
Sources: Press release, Bloomberg, The Wall Street Journal
Commentary: Value Stocks in the Insurance Sector • Capture The CalPERS Effect For Stock Ideas • The Short Case on Marsh & McLennan Companies
Stocks/ETFs to watch: Marsh & McLennan Companies (MMC). Competitors: American International Group (AIG), Aon (AOC), ING Group (ING).ETFs: streetTRACKS KBW Insurance (KIE)
Time to Move from Euro to U.S. Equities -- JPMorgan
JP Morgan gave the U.S. equity markets their first Overweight rating since April 2005; it also cut Eurozone equities to Underweight. It said it believes investor risk/reward "is increasingly moving in favor of the U.S." Even if the investment environment remains 'equally supportive' of non-U.S. growth, it said, the U.S. should participate more fully in equity gains because of its significant exposure to overseas growth and the benefit of a weak dollar. And if global equities drop, "the U.S. should fulfill its natural role as the large defensive safe haven." Other factors it cited favoring U.S. growth: policy direction and yield curve developments, relative currency shifts and stock rotation.
Commentary: The Bearish Case for Today's Markets • Volatility Near Historical Lows: Good Time to Buy Portfolio Insurance? • John Hussman: Avoid Being the Greatest Fool • A Few Reasons to Continue Equity Exposure
Stocks/ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)
Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
It was a familiar pattern yesterday as Monday "merger mania" scored again, this time with Alcoa (AA) making a bid for Canadian rival Alcan (AL), and the market loved it. Both stocks advanced, with AA up $2.91 and AL up $21.46.
The other familiar market catalyst, crude oil, fell for the sixth-straight session, and this brought in buyers to propel the markets forward enough to set several more records. The Dow Industrials closed above 13,300 for the first time and also achieved the 24th gain in 27 trading days -- equaling a record set in 1927. But it was not a broad advance, as technology stocks took a hit over a cessation of takeover talks between Microsoft (MSFT) and Yahoo! (YHOO).
At the close yesterday, the Dow Industrials had gained 48 points to close at 13,313, the S&P 500 was up four at 1,509 and the Nasdaq lost a point and closed at 2,571. Volume dropped sharply resulting from several closed European markets, and the NYSE traded 1.1 billion shares while the Nasdaq crossed 1.4 billion. Breadth was slightly positive on both markets, with an average of 17 advancers for every 15 decliners.
Crude oil (June contract) fell 46 cents to $61.47 a barrel, down 7.5% in the last six sessions, and the Amex Energy SPDR (XLE) gained 18 cents at $64.83. If crude closes below $60.63, it would violate the March 20 lows and set up the contract for a possible sharp drop. Gold rose by 70 cents, closing at $690.40 per troy ounce, and the Philly Gold and Silver Index [XAU] was up $1.28 at $143.14.
What the Markets Are Saying
With sentiment bearish (as represented by the public's bullish-vs.-bearish numbers), investment advisers cautious, and NYSE short interest very high, the only conclusion that can be reached is that there is still a lot of money that has yet to be invested.
Several advisory services finally recognized what has happened and said this weekend, "The public has missed the train." And not only that, but they also keep thinking that the train will back up so that they can finally jump aboard. Not only has the train left the station, but it's in the next state.
Only when they realize that a big correction is not going to happen will they finally attempt to catch up and jump aboard for the final rally that will be capped by an explosion of buying caused by the shorts covering. Hopefully when that happens, we will be cashing in our gains. But for now the train rumbles on with lots of fuel still in the hopper.
Today's Trading Landscape
March wholesale inventories will be reported at 10 a.m. Earnings are slated from Allied Capital (ALD), Cisco Systems (CSCO), El Paso (EP), Electronic Arts (ERTS), Disney (DIS) and Qiagen (QGEN), among others. Duke Energy (DUK) (read above) just reported that its earnings were down slightly.
European markets are trading lower this morning following a report that German industrial production fell in March, but Asia is higher. Our markets will likely be mixed today as a result of caution prior to tomorrow's Fed policy statement.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Retreat From a Record, Led by BHP, Rio; China Shares Surge Asian stocks dropped from a record after falling commodity prices pulled down shares of BHP Billiton Ltd. (BHP) and Rio Tinto Group (RTP).
• Packer's Publishing & Broadcasting to Split Into Gaming, Media Companies James Packer's Publishing & Broadcasting Ltd., Australia's largest casino and media owner, plans to split into two companies and pay about A$2 billion ($1.7 billion) to shareholders to boost returns.
• Benq Chairman, Four Executives Charged With Insider Trading in Taiwan Benq Corp. Chairman K.Y. Lee and four other executives were charged with insider trading in the company's stock, Taiwanese prosecutors said today.
• Pakistan Plans Global Bond Sale as Economic Growth Lifts Investor Interest Pakistan will start marketing foreign-currency bonds for the fourth time in three years as accelerating economic growth spurs interest in the South Asian nation.
European Headlines (via Bloomberg.com)
• European Stocks Fall, Led by KPN, Clariant; Reuters, William Morrison Gain European stocks fell after Royal KPN NV (KPN), the largest phone company in the Netherlands, reported earnings that missed analysts' estimates and chemical maker Clariant AG's profit dropped.
• Allianz Says Insurance Profit Rose in Quarter; Dresdner Bank Earnings Fell Allianz SE (AZ), Europe's biggest insurer, said profit at its Dresdner Bank unit declined 7 percent in the first quarter as it released fewer provisions for risky loans. Earnings at the insurance units rose.
• Adidas Profit Tops Estimates as Sales Advance; Shares Rise Most Since 2005 Adidas AG (OTCQX:ADDYY), the world's second-largest sporting-goods maker, reported first-quarter profit that fell less than analysts estimated as the company stemmed a drop in sales of Reebok sneakers.