Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:54 AM EST
S&P 500: -3.00; 1,542.90
NASDAQ 100: -6.00; 1,961.50
Dow: -25.00; 13,705.00
NIKKEI 225: +0.08%; 8,163.61 (+14.09)
HANG SENG: 21,582.89 (06/18)
S&P/ASX 200: +0.45%; 6,372.00 (+28.60)
BSE SENSEX 30: +1.53%; 14,295.50 (+215.36)
FTSE 100: -0.36%; 6,679.40 (-24.10)
CAC 40: -0.27%; 6,071.00 (-16.15)
XETRA-DAX: -0.17%; 8,022.65 (-13.47)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.25%; $68.92 (-$0.17)
Gold: -0.36%; $657.50 (-$2.40)
Natural Gas: -0.21%; $7.674 (-$0.016)
Silver: -0.68%; $13.145 (-$0.09)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
May Housing Starts and Permits Exceed Forecasts
New housing starts fell 2.1% in May to a seasonally adjusted 1.47 million (see Briefing.com chart), their first drop in four months, while building permits were up 3% to 1.5 million, according to estimates released Tuesday by the Commerce Department. Both figures were stronger than economist estimates of 1.46 million for starts (-3.5%) and permits (0.1%). In a possible sign that homebuyers are cutting back in the face of harsher credit standards, single family home starts fell 3.4%, while multi-family starts were up 3.1%. Permits were down 1.8% and up 16.5% respectively. Houses completed were down 0.5% to 1.534 million. Regionally, Northeast and Midwest starts climbed 16%, West starts were down 20%, and South starts fell 1.6%. "There is way too much supply. If you're a homebuilder with inventory, the market is skewed against you," economist Joshua Shapiro said.
Sources: Press release (.pdf), MarketWatch, Bloomberg, Wall Street Journal
Commentary: Homebuilder Confidence Drops to 16-Year Lows • Housing Market Index Plumbs New Lows • S&P 500 Performance and the NAHB Home Builder Index: How Correlated?
Stocks/ETFs to watch: D.R. Horton (DHI), Lennar (LEN), Pulte (PHM), Centex (CTX), Toll Brothers (TOL), KB Home (KBH). ETFs: streetTRACKS SPDR Homebuilders ETF (XHB), iShares Dow Jones US Home Construction (ITB), PowerShares Dynamic Building & Construction (PKB)
Related: Relationship between Permits, Starts, and Completions [Census Bureau]
Best Buy Badly Misses EPS Estimates, Sending Shares Lower
Tuesday morning, U.S. # 1 consumer electronics retailer Best Buy reported FY2008 first-quarter profits fell 18%, good for diluted EPS of just $0.39 versus EPS of $0.47 in the year earlier period. The company largely blamed the fall in net on increased sales of lower-margin products, as revenue jumped 14% in the latest quarter to $7.93 billion. Thomson Financial consensus estimates called for EPS of $0.49 on revenue of $7.85 billion; Bloomberg consensus called for EPS of $0.50. Same-store sales rose 3% from a year ago. Best Buy CFO Darren Jackson said in the press release: "Early evidence suggests that consumer spending will be more difficult to predict this year... We believe it is prudent to adjust our outlook given what we have seen thus far," adding that it is still "early in the fiscal year" to make exact projections. Shares reacted harshly to the news dropping more than 4% to $46.08 in pre-market action (as of 8:22 a.m. EST).
Sources: Press Release, Bloomberg, Reuters, MarketWatch [check back later today for Best Buy's most recent conference call transcript
Commentary: Best Buy: Still King of Electronics Retail • A Tale of Two Consumer Electronics Retailers • Earnings Preview: Four Companies That Could Surprise This Week
Stocks/ETFs to watch: Best Buy Co. (BBY). Competitors: Circuit City Stores Inc. (CC), RadioShack Corp. (RSH), Wal-Mart Stores Inc. (WMT). ETFs: Consumer Discretionary SPDR ETF (XLY), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
Conference call transcripts: Best Buy F4Q07 (Qtr End 3/3/07) Earnings Call Transcript
Expedia Up 16% on News of $3.5B Buyback
Shares of Expedia were last up 16.2% to $29.64 in pre-market trading on news the company intends to repurchase up to 116.7 million shares, or approximately 42% of common stock outstanding. The buyback will be in a price range of $27.50 - $30.00, representing an 8% to 18% premium over its $25.50 close Monday. It will commence during the week of June 25 and expire (unless extended) the week of August 6. "With this action, we couldn't be clearer that the management and the Board of this company are confident in the value of Expedia and in its long term future," said Chairman Barry Diller in a press release. Expedia said it will use a modified "Dutch auction," allowing shareholders to indicate how many shares and at what price within the company's specified range they wish to tender. Liberty Media, which owns a 15.7% stake in Expedia, said it does not plan to sell its shares.
Sources: Press release, Reuters
Commentary: Expedia: How About A Leveraged Buyback? • Expedia Up On Speculation It Will Go Private • Expedia Looks Hot Going Into Summer Travel Season
Stocks/ETFs to watch: Expedia, Inc. (EXPE), Liberty Media Capital (LCAPA). Competitors: Travelzoo Inc. (TZOO), Priceline.com Inc. (PCLN). ETFs: PowerShares Dynamic Leisure & Entertain (PEJ)
Conference call transcripts: Expedia Q1 2007
FactSet Beats By a Penny, Guidance Tops Estimates, Shares Higher
FactSet Research Systems, a leading provider of financial information and analytical applications, reported fiscal Q3 (ended May 31) net income climbed 36% to $28.6 million, or $0.56/share ($0.52/share ex-items), on revenue growth of 22.5% to $121.1m. It issued Q4 revenue guidance of $126m - $130m, ahead of the Reuters Estimates consensus of $125.1m. Its shares were up 3.2% to $65.89 in very thin pre-market trading. FactSet said it gained 1,300 users (total 33,300) and 42 clients (total 1,914) during the quarter, as its client retention rate remained above 95%. It repurchased 196,929 shares for $12.3m in Q3 and has $103.2m authorized for future buybacks. FactSet rose 0.8% to $63.87 in normal trading Monday. Its shares have traded in a range of $42.30 - $68.13 over the past year. FactSet is scheduled to report Q4 earnings Sept. 25.
Sources: Press release, Briefing.com
Commentary: FactSet Research Systems Doubles Its Dividend and Surpasses the Street [Q2] • Will Interactive Data Survive at SEC Without Chris Cox? • Jim Cramer's Take on FactSet
Stocks/ETFs to watch: FactSet Research Systems (FDS). Competitors: Reuters Group plc (RTRSY), Thomson Corp. (TOC)
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Asian Headlines (via Bloomberg.com)
• Asian Exporter Stocks Fall, Led by Nissan, on U.S. Homes Data; ICICI Gains Asian exporter stocks fell after a report showed confidence in the U.S. homebuilding industry slipped to a 16-year low and oil prices traded near the highest in nine months.
• Euro Falls After German Investor Confidence Unexpectedly Declined in June The euro fell the most in a week against the dollar and the yen after a report today showed investor confidence in Germany, Europe's largest economy, unexpectedly declined.
• GrameenPhone to Sell Shares in 2008 in Bangladesh's Biggest Share Offering GrameenPhone Ltd., the largest mobile-phone company in Bangladesh, said it plans to sell shares in an initial public offering on the Dhaka stock exchange next year to fund expansion.
• Sterlite Raises $1.75 Billion In Biggest U.S. Stock Sale by Indian Company Sterlite Industries (India) Ltd., the copper and zinc producer controlled by billionaire Anil Agarwal, sold $1.75 billion of stock in the U.S., the biggest overseas share sale by an Indian company.
• China Cuts Export Tariffs to Curb Record Trade Surplus, Reduce Frictions China said it will reduce export rebates on 2,831 products to curb the country's record trade surplus, ease friction with other countries and spur industries to use less energy.
European Headlines (via Bloomberg.com)
• European Retail Stocks Drop, Led by Tesco, Marks & Spencer; Invensys Gains European retail stocks fell after Tesco Plc (OTCPK:TSCDY), the U.K.'s largest supermarket operator, predicted a ``tougher year'' because of higher interest rates and increased competition. Marks & Spencer Plc and Carrefour SA paced the decline.
• Cadbury to Cut 7,500 Jobs, Sell Drinks Unit in U.S. to Shore Up Earnings Cadbury Schweppes Plc (CSG), the world's biggest candy company, plans to cut 7,500 jobs and sell the U.S. drinks unit that makes Dr Pepper and 7 Up to shore up profit and raise funds for expansion.
• German Investor Confidence Unexpectedly Declined in June, ZEW Index Shows German investor confidence unexpectedly fell in June as borrowing costs climbed, suggesting economic growth may have reached a plateau.
• Tesco Sales Advance at Slowest Pace in a Year as Shoppers Cut Back in U.K. Tesco Plc (OTCPK:TSCDY), Britain's biggest retailer, said sales advanced at the slowest pace in 12 months and predicted a ``tougher year'' because rising interest rates are crimping consumer spending and competition is eroding prices.
• Ryanair Cuts Fares, Says Ticket Prices Lower Than Forecast; Shares Slide Ryanair Holdings Plc (RYAAY), Europe's largest discount carrier, said ticket prices are lower than expected and that airlines face a ``big downturn'' in the next 12 months. The shares dropped as much as 5.2 percent.