Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:53 AM EST
S&P 500: +4.60; 1,553.50
NASDAQ 100: +7.00; 1,974.00
Dow: +48.00; 13,803.00
NIKKEI 225: +0.26%; 18,211.68 (+48.07)
HANG SENG: +0.47%; 21,684.67 (+101.78)
S&P/ASX 200: +0.39%; 6,396.90 (+24.90)
BSE SENSEX 30: +0.81%; 14,411.95 (+116.45)
FTSE 100: +0.59%; 6,689.40 (+39.20)
CAC 40: +0.86%; 6,124.15 (+52.48)
XETRA-DAX: +1.12%; 8,123.53 (+90.01)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.43%; $68.80 (-$0.30)
Gold: -0.09%; $664.10 (-$0.60)
Natural Gas: +0.36%; $7.55 (+$0.03)
Silver: +0.08%; $13.335 (+$0.01)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Morgan Stanley Trading to Upside on Big Q2 Earnings Beat
Morgan Stanley said Q2 net income rose 40% to a record $2.58 billion, or $2.45/share, smashing analysts' average estimate of $2.00/share. Its shares are trading up 2% to $89.59 in the pre-market on volume over 100,000 shares. This marks the second consecutive quarter Morgan's earnings have grown faster than Goldman Sachs', after years of lagging its rival. Sales (or assets under management where appropriate) grew double-digits across all segments, increasing 32% overall to $11.5b, also a new record. Revenues rose most in Investment Banking, up 65% to $1.7b. The spin-off of Discover remains on track, scheduled for June 30. Chairman and CEO John Mack commented on seven straight quarters of ROE above 20%, saying "we're well on our way to reaching our goal of doubling 2005 earnings over five years." Shares of Morgan Stanley fell 0.8% to $87.80 Tuesday.
Sources: Press release, Bloomberg
Commentary: Earnings Preview: Four Companies That Could Surprise This Week • Supreme Court Tosses Class-Action Suit Against I-Banks • Morgan Stanley Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Morgan Stanley (MS). Competitors: Goldman Sachs Group Inc. (GS), Merrill Lynch & Co. Inc. (MER), Lehman Brothers Holdings Inc. (LEH). ETFs: iShares Dow Jones US Broker-Dealers (IAI), Financial Select Sector SPDR (XLF), Financial Select Sector SPDR (XLF)
FedEx Misses Estimates; Expects Business To Pick Up In Late Summer
Wednesday FedEx reported its fourth-quarter (FY2007) profit rose 7%, despite weakened demand for transportation services in the U.S. By the numbers, net rose to $610 million, good for EPS of $1.96 per share, up from a profit of $568 million (EPS of $1.82) a year ago. Excluding a $0.06 a share gain from a settlement with Airbus related to the company's A380 order cancellation, EPS was $1.90, below Thomson and Bloomberg consensus estimates of $1.95 and $1.97 a share, respectively. Revenue climbed 8% to $9.15 billion; Thomson had projected revenue of $9.16 billion. FedEx had itself forecast EPS in a range of $1.93 to $2.08 a share. Despite struggling U.S. shipping demand, FedEx was able to expand its air freight delivery business in the U.K., China and India, leading to the climb in profit and revenue. Total Express and Ground unit volume gained approximately 4%. According to A.G. Edwards & Sons analyst Donald Broughton, "the company's highest-margin business is international express, which is growing, while one of their lowest-margin areas, domestic express, is shrinking. That leads to a higher profit." Chairman, President and CEO Fred Smith expects "the U.S. economy to begin to show modest year-over-year improvement in the late summer to early fall." In its Press Release, FedEx said it expects next quarter's EPS to be in the $1.45 to $1.60 range, with full year FY2008 guidance of $7.00 to $7.40 per diluted share, assuming an improvement in the U.S. economy beginning in the late summer or early fall. Shares were trading lower by half a percent in pre-market trading, as of 8:05 a.m. EST.
Sources: Press Release, Bloomberg, AP, MarketWatch [check back later today for FedEx's latest conference call transcript]
Commentary: FedEx Corporation: Technical Analysis Contradicts Fundamental Picture • Cramer's Take on FDX • FedEx's Earnings Disappointment: No Surprises Here
Stocks/ETFs to watch: FedEx Corporation (FDX). Competitors: United Parcel Service (UPS). ETFs: iShares Dow Jones Transport (IYT)
Conference call transcripts: FedEx F3Q07 (Qtr End 2/28/07) Earnings Call Transcript
Circuit City Posts Q1 Loss, Withdraws Guidance, Shares Trading Lower
Circuit City reported a net loss from continuing operations of $54.8 million, or -$0.33/share, compared to EPS of $0.04 last year, as sales fell 4.2% to $2.38b; same-store-sales were down 5.6%. Its shares were last off 1.7% in pre-market trading on volume over 110,000 shares. Bloomberg reports the decline in sales was its first in more than three years. Gross margin decreased 2% y/y to 22.5%. CEO Philip J. Schoonover said he was "disappointed" with the large Q1 net loss, but noted the company met its revised guidance while "up against its toughest comparable store sales increase comparison of this fiscal year." He warned there will be continued volatility in the company's financial results over the near term as structural changes are made. Schoonover said the company is withdrawing its fiscal 2008 guidance for these reasons, in addition to an uncertain macroeconomic environment. Circuit City repurchased 2.5m shares for $46.7m during the quarter. It has over $200m remaining under its share repurchase authorization.
Sources: Press release, Bloomberg
Commentary: The Week Ahead: Best Buy, Circuit City, FedEx To Report • Best Buy: Still King of Electronics Retail • Abysmally Run, Circuit City Is Ripe For Buyout • Circuit City Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Circuit City Stores Inc. (CC). Competitors: Best Buy Co. Inc. (BBY), RadioShack Corp. (RSH), Wal-Mart Stores Inc. (WMT), Costco Wholesale Corp. (COST). ETFs: Consumer Discretionary SPDR (XLY), PowerShares Dynamic Consumer Discretionary (PEZ), Vanguard Consumer Discretionary VIPERs (VCR)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Climb for Fifth Day, Led by Nintendo, Hon Hai on Bond Yields Asian stocks climbed for a fifth day, led by companies that export to the U.S., after a drop in bond yields eased concern higher interest rates will damp spending in the world's largest economy.
• PetroChina May Raise $5.6 Billion in Shanghai Share Sale to Fund Expansion PetroChina Co. is planning the nation's biggest share sale this year to raise as much as $6 billion in Shanghai for overseas acquisitions, increased oil drilling and refinery construction.
• China Cosco Sells $2 Billion of Stock, Plans to Buy More Container Ships China Cosco Holdings Co., Asia's largest container line, sold 15 billion yuan ($1.97 billion) of stock in Shanghai to buy new ships as Chinese exports of clothes, toys and televisions surge.
• Kingfisher Signs $7.3 Billion Preliminary Accord to Buy More Airbus Planes Kingfisher Airlines Ltd., the only Indian customer for the Airbus SAS A380, pledged to buy 50 planes from the aircraft maker, including the new A350 XWB, in a preliminary contract valued at $7.3 billion at list prices.
• South Korea, Recouping Bailout Funds, Offers to Sell $988 Million of Woori South Korea's government offered to sell 5 percent of Woori Finance Holdings Co. (WF) for as much as $988 million, trimming its stake in the nation's third-largest financial firm to recoup funds used in an industry bailout.
European Headlines (via Bloomberg.com)
• Stocks in Europe Rise, Led by Insurers; Clariant, Ciba Gain on Bid Report European stocks rose for the first time in three days as a drop in bond yields in the U.S. and Europe pushed insurers and banks higher.
• King Overruled as Bank of England Voted 5-4 to Keep Rate Unchanged in June Bank of England policy makers narrowly defeated Governor Mervyn King's bid to raise interest rates this month, adding to speculation of an increase as soon as July.
• H&M Profit Climbs 31 Percent on Hong Kong, Shanghai Stores, Madonna Range Hennes & Mauritz AB, Europe's second- largest clothing retailer, said second-quarter profit advanced 31 percent as the Swedish company opened stores in Hong Kong and Shanghai and sold dresses designed by Madonna.
• Sainsbury Sales Rise 5.1 Percent on Growing Demand for Fresh, Organic Food J Sainsbury Plc, the U.K. supermarket chain whose shares surged this year on takeover speculation, said first-quarter sales growth outstripped that of Tesco Plc as customers spent more on organic produce.
• UBS Widens Private-Bank Lead Over Citigroup, Merrill Lynch, Survey Shows UBS AG (UBS), the biggest money manager for the wealthy, widened its lead over Citigroup Inc. (C) and Merrill Lynch & Co. (MER) last year as rising stock markets attracted new funds, according to consulting firm Scorpio Partnership.