Wall Street Breakfast: BP Profit Slumps But Beats Forecasts

|
Includes: AAPL, ACC, B, BABA, BAYRY, BCS, BP, CDNS, CG, CHTR, CKISF, COF, DD, EBAY, ESRX, HGKGY, HUSKF, LH, MMTOY, NBR, NOK, PRGO, QQQ, SANM, SPY, T, TCS, TWTR, XRX, ZION
by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

BP's underlying Q1 replacement cost profit, which is analogous to underlying net income, slumped to $532M from $2.57B a year earlier but beat expectations for a loss of $244.9M. Total revenues and other income dropped to $39.2B from $56.2B. "Despite the challenging environment, we are driving toward our near-term goal of rebalancing BP's (NYSE:BP) cash flows," says CEO Bob Dudley. "Operational performance is strong and our work to reset costs has considerable momentum and is delivering results." As you'd expect, the weakness in oil prices hurt profits. Shares were +4.2% in London at the time of writing.

Economy

The FOMC is today scheduled to start the first of a two-day meeting where it's expected to hold rates at 0.25-0.5%. As ever, there will be as much interest in the Fed's statement as in the decision itself, with all and sundry looking for clues as to what bank officials might decide in their next meetings. Optimism about the economy could signal a rate rise in the near future but pessimism could indicate there will be no such thing anytime soon. Janet Yellen wasn't particularly helpful when she said recently that the U.S. is "on a solid course" but that "we're suffering a drag from the global economy."

Stocks

Apple is expected to report its first year-on-year revenue drop in 13 years when it releases its FQ2 earnings after the bell today. Analysts estimate that Apple's (NASDAQ:AAPL) revenue slumped 10.4% to $52B and that EPS fell to $2 from $2.33. Declining iPhone sales are believed to have hurt earnings, with Seeking Alpha author Mark Hibben writing that "iPhone SE and the 9.7 inch iPad Pro probably arrived too late in the quarter to have much impact." There are also fears that iPhone volumes will underwhelm this quarter as well.

Global equities have been attempting to recover today from a poor opening to the week yesterday as investors await the start of policy meetings at the Fed and the Bank of Japan, as well as Apple's (AAPL) earnings report later on. European shares benefited from better-than-expected results, particularly at BP (BP).

FCC Chairman Tom Wheeler has recommended the approval of Charter's (NASDAQ:CHTR) deals for Time Warner Cable (TWC) and Bright House Networks, while the Justice Department has also conditionally approved the transactions. The Justice Department valued Charter's takeover of Time Warner at $78B and that of Bright House at $10.4B.

Things have gotten far worse for Mitsubishi Motors, which has now admitted that it improperly tested the fuel economy of its cars for 25 years, including falsifying data. Last week, Mitsubishi (OTC:MMTOY) said it hadn’t been complying with Japanese testing standards since 2002. The latest disclosure has deepened concerns about Mitsubishi's viability - expect huge customer compensation costs - and sent shares plunging again.

U.K.-listed investment vehicle Atlas Mara, which was created by billionaire Ashish Thakkar and former Barclays (NYSE:BCS) CEO Bob Diamond, has confirmed that it is interested in acquiring the U.K. bank's 62%, $5.3B holding in its African operations. However, Atlas Mara didn't disclose whether Carlyle (NASDAQ:CG) is involved in the process despite reports saying that the U.S. firm is in talks with Diamond over the deal.

Alibaba affiliate Ant Financial Services has raised a whopping $4.5B at a reported valuation of $60B, making the deal the world's largest private fundraising round for an Internet company. Ant operates Alipay, which is China's biggest online-payments platform by transaction volume and which has 450M annual active users. Ant was spun off from Alibaba (NYSE:BABA) prior to the latter's record $25B New York IPO in September 2014. The companies still invest together and Alibaba uses Alipay.

Du Pont's Q1 net profit rose to $1.2B from $1B a year earlier and adjusted EPS of $1.26 beat expectations, while the company increased its profit guidance as well. Q1 revenue dropped 5.5% to $7.41B but also topped consensus. "Solid execution, local price and product mix gains, and higher corn area led to a strong start to the year for our (agriculture) business," says DuPont (NYSE:DD) CEO Ed Breen. "Our other businesses generally performed well, slightly above our expectations."

eBay, Twitter, AT&T and Capital One Financial are among the companies that are scheduled to join Apple (AAPL) today in releasing earnings reports. Analysts expect that eBay's (NASDAQ:EBAY) Q1 EPS slipped to $0.45 from $0.48 a year earlier as revenue fell 53% to $2.08B. Twitter's (NYSE:TWTR) EPS is seen rising to $0.10 from $0.07 and revenue is seen surging 39% to $607.8M. The consensus for AT&T (NYSE:T) is that EPS grew to $0.69 from $0.63 while sales jumped 24% to $40.5B. Capital One Financial's (NYSE:COF) EPS is estimated to have declined to $1.91 from $2 even though revenue may have climbed 9% to $6.16B.

Bayer's Q1 adjusted EBITDA jumped 16% to €3.4B ($3.8B) and topped expectations of €3.07B, helped by prescription products such as eye treatment Eylea. Bayer's (OTCPK:BAYRY) sales rose 0.5% to €11.9B as "all segments posted gains in their operating performance." The German company still expects adjusted EBITDA to increase by a medium single-digit percentage this year.

Husky Energy has agreed to sell a 65% stake in oil pipelines in Alberta and Saskatchewan for C$1.7B ($1.34B) to Cheung Kong Infrastructure Holdings (OTC:CKISF) and Power Assets Holdings (OTCPK:HGKGY). News of the sale came as Husky (OTCPK:HUSKF) reported a Q1 EPS loss of C$0.47 with no adjustments for one-time items.

Nokia has agreed to pay €170M ($191M) to buy French fitness-gadget maker Withings as the Finnish company looks to kickstart its return into the consumer market with a move into digital health. "With this acquisition, Nokia (NYSE:NOK) is strengthening its position in the Internet of Things," says CEO Rajeev Suri, adding that the deal "puts us at the heart of a very large addressable market."

Monday's Key Earnings
Container Store Group (NYSE:TCS) +21% on relief rally after earnings.
Sanmina (NASDAQ:SANM) +8.3% on FY Q2 beats, solid profit guidance.
Perrigo (NASDAQ:PRGO) -12.8% after cutting Q1, FY estimates below consensus, losing CEO.
Xerox (NYSE:XRX) -13.3% following Q1 EPS miss and weak guidance.
LabCorp (NYSE:LH) +2.7% after Q1 revenue surges 30%, ups guidance.
Nabors (NYSE:NBR) -5% after beating by $0.04 but missing on revenue.
Express Scripts (NASDAQ:ESRX) -2.4% despite raising guidance; Q1 top line flat.
Zions (NASDAQ:ZION) -0.1% after Q1 EPS, revenue miss.
Barnes Group (NYSE:B) -0.8% after EPS in line, misses on revenue.
Cadence Design Systems (NASDAQ:CDNS) -2.1% following cautious guidance.
American Campus (NYSE:ACC) flat after EPS misses by a penny, maintains guidance.
Today's Markets

In Asia, Japan +0.5% to 17353. Hong Kong +0.5% to 21407. China +0.3% to 9648. India +1.3% to 26007.
In Europe, at midday, London +0.3%. Paris -0.2%. Frankfurt flat.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude +0.8% to $42.98. Gold -0.4% to $1235.45.
Ten-year Treasury Yield +1 bps to 1.91%.

Today's Economic Calendar
FOMC meeting begins
8:30 Durable Goods
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.
1:00 PM Results of $34B, 10-Year Note Auction Companies reporting earnings today