Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:25 AM ET
S&P 500: -17.25; 1507.50
NASDAQ 100: -19.75; 2006.75
Dow: -123.00; 13718.00
NIKKEI 225: -0.88%; 17,702.09 (-156.33)
HANG SENG: -0.64%; 23,211.69 (-150.49)
SHANGHAI SE COMPOSITE: +0.52%; 4,346.46 (+22.49)
BSE SENSEX 30: +0.49%; 15,776.31 (+76.98)
FTSE 100: -1.10%; 6,383.20 (-71.10)
CAC 40: -1.45%; 5,752.52 (-84.59)
XETRA-DAX: -1.06%; 7,610.84 (-81.71)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +1.04%; $76.67 (+$0.79)
Gold: -0.47%; $683.30 (-$3.20)
Natural Gas: +1.16%; $5.99 (+$0.07)
Silver: -0.27%; $13.115 (-$0.035)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
R.H. Donnelley Buys Business.com for a Rich $345M
Telephone-directory company R.H. Donnelley Corp. said it has agreed to acquire internet business search/directory site Business.com Inc. for $345 million after it won an auction conducted by Credit Suisse. Founded by entrepreneurs Jake Winebaum and Sky Dayton in 1999, who at the time were ridiculed for doling out $7.5 million on a single internet domain name, Business.com's online version of Donnelley's Yellow Pages allows users to search for business services. Its earnings comes through revenue sharing from the companies whose sites benefit from the clickthroughs. Other bidders in the auction included Dow Jones & Co., New York Times, and News Corp. Earlier this year, Microsoft Corp. founder Bill Gates predicted that "yellow-page usage amongst people... say, below 50, will drop to near zero" in coming years. "With this transaction R.H. Donnelley takes another significant step forward in the online local commercial search marketplace," said CEO David C. Swanson. "We will immediately gain a profitable business-to-business vertical that is widely recognized as one of the leaders in the market. We also gain technology and talent that will accelerate our capabilities with DexKnows.com and other aspects of our digital strategy." Business.com's 2007 Ebitda [earnings before interest, taxes, depreciation and amortization] is about $15 million according to the Wall Street Journal -- giving it a rich 22 times Ebitda multiple. RHD said in its press release it expects Business.com to generate revenues of greater than $50 million in 2007. The deal is expected to close in the third quarter.
Sources: Press release, PaidContent.org, Wall Street Journal, Reuters
Commentary: How to Invest in (Even Misspelled) Domain Names • Answers Corporation Buys Dictionary. com For the Domain Name
Stocks/ETFs to watch: RHD, NYT, DJ, NWS
ExxonMobil Misses Estimates on First Income Drop in Three Years
The world's number-one oil company ExxonMobil said Q2 net income fell 1% on a drop in production, prices, and lower natural-gas volume. EPS of $1.83, vs. $1.72 a year ago, missed analyst estimates of $1.96. Net income fell from $10.36 billion to $10.26 billion, and revenue declined 0.7% to $98.35 billion -- $1.1 billion higher than forecasts. Oil and gas production earnings fell 17% to $5.95 billion, while chemical earnings jumped 21% to $1.01B on higher volume and profit margins. Venezuela seized Exxon's 42% stake in Cerro Negro last month after it said they had failed to come to terms. The decline marked Exxon's first profit drop since Q1 2004. Oil prices fell 8.1% year-over-year to $65.02/barrel over the quarter. Exxon shares are up 21% YTD, just short of the 22% gain posted by the Chicago Board Options Exchange's oil index. Shares are down 2.25% in pre-market trading.
Sources: Wall Street Journal, Bloomberg, Reuters
Commentary: How High Can Crude Oil Fly? • Oil Companies Find Trouble in Venezuela: Which to Hold, Which to Sell? • ExxonMobil and ConocoPhillips: Adios, Venezuela
Stocks/ETFs to watch: XOM. Competitors: RDS.A, BP, COP, TOT. ETFs: DIG, VDE, PRFE
Ford's Shares Rise on Surprise 2Q Profit
Shares of Ford are trading higher in pre-market activity, last up 3.5% to $8.28, effectively recovering Wednesday's decline by the same amount, on news Ford reported its first profit in seven quarters with net income of $750 million, or $0.31/share. Excluding restructuring costs and gains from the sale of Aston Martin, EPS totaled $0.13. Analysts had estimated a loss of $0.35 on average. Ford reported a loss of $317m or -$0.17 in the prior year quarter. Revenues rose 5.5% to $44.2b, compared to analysts' forecast of $37.5b. In a press release, Ford confirmed it is currently exploring the potential combined sale of Jaguar and Land Rover and is in discussions with selected parties who have expressed interest. Also, Ford acknowledged it is conducting a strategic review of Volvo that it expects to finish by year end. Ford's earnings call is at 9 a.m. EDT. Check for Ford's earnings call transcript later today.
Sources: Press release, Bloomberg
Commentary: Ford Denies Reports of Plans to Sell Volvo • Should Ford Sell Volvo? Four Customer Needs To Consider • Big Three Automakers Lose Ground to Japanese in June
Stocks/ETFs to watch: Ford Motor Company (F). Competitors: GM, DCX, TM, NSANY, HMC
Canon 2Q Net Up 17%, But Lowers FY Guidance on Accounting Charge
A weak yen and continued strength in digital camera sales drove Canon's 2Q earnings growth of 17% to ¥123.93 billion ($1.03b), topping its own projection of ¥118.75b, on 9.5% higher sales to ¥1.13t ($9.42b). However, for the full fiscal year (ending March) Canon lowered its net profit forecast to ¥500b ($4.17b) from ¥505b, on larger-than-expected depreciation costs. Given the weak yen, which boosted its operating profit by ¥99.5b ($830m), Canon raised its full FY sales forecast by about 1% to ¥4.58t ($38.2b). Canon's ordinary shares lost 2.3% to ¥6,890 ($57.46 ADR equiv. at ¥119.9/$1) ahead of its earnings release, on broad market weakness. Its ADRs fell 1.15% to $58.20 on Wednesday.
Sources: Full earnings press release and presentation [pdf], Bloomberg, MarketWatch, Reuters
Commentary: Hewlett-Packard, Canon Lead the Peripheral Device Industry • Japanese Exporters Look Poised to Profit from Weak Yen • Are Printer Companies Chasing the Wrong Target?
Stocks/ETFs to watch: Canon Inc. (CAJ). Competitors: SNE, HPQ, EK, XRX
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• U.S. number three healthcare provider Aetna Inc. (AET) reported a 16% rise in 2Q net income, to EPS excluding items of $0.83. Revenue rose 9% to $6.8 billion. Consensus analyst estimates had been for EPS of $0.80. The company lifted its full-year EPS forecast to a range of $3.40-$3.42, from its previous projection of $3.35. (source: Reuters)
• Energy company Apache Corp. (APA) reported 2Q net earnings of $633.5 million (EPS of $1.89) on a 20% rise in revenue to $2.47 billion. Consensus analyst estimates were for EPS of $1.90 on revenue of $2.26 billion. The company announced it is "well on its way" to achieving full year growth at the top of its forecast 9%-12% range. (source: MarketWatch)
• AstraZeneca PLC (AZN) reported declining 2Q profits on restructuring costs and higher development expenses. The company reported strong sales from heartburn treatment Nexium, antipsychotic Seroquel and cholesterol-lowering drug Crestor. Net profit fell to $1.43 billion on a 10% sales gain to $7.27 billion. The company raised its full year EPS forecast to a range of $3.90-$4.05, from a previous forecast of $3.80-$4.05. (source: Dow Jones Newswires)
• Bristol-Myers Squibb (BMY) reported 2Q net income of $706 million, good for EPS of $0.36, in-line with consensus analyst estimates. Net sales rose 1% to $4.9 billion. The company upped its full year EPS guidance to $1.35-$1.45, and promised "a comprehensive cost reduction program." (source: AFX News)
• Homebuilder Beazer Homes (BZH) reported a quarterly net loss of $3.20 a share, compared with an EPS gain of $2.37 a year earlier. Not counting one-time pre-tax charges, EPS came in at -$0.06, versus analyst expectations the company would lose $0.46 a share. Revenue was $761 million, down from $1.2 billion a year earlier. (source: Dow Jones Newswires)
• 3M Co. (MMM) reported quarterly profits rose on strong performance in its safety and security, and health care businesses. Net income was $917 million (EPS of $1.25); excluding one-time items, the company pulled in $1.23 a share. Consensus estimates were for EPS of $1.18. Revenue came in at $6.1 billion. The company now expects its full year EPS to be in a range of $5.40-$5.60, versus its prior estimate of $5.20-$5.45. (source: Press Release, Reuters)
• Defense contractor Raytheon Co. (RTN) reported 2Q profit climbed to $1.33 billion (EPS of $2.97) from $310 million a year earlier, on $5.42 billion in sales. EPS from continuing operations were $0.79 versus consensus analyst estimates of $0.68. The company raised its full year EPS outlook from continuing operations to a range $3.05-$3.20, from a previous estimate of $2.85-$3.00. (source: MarketWatch)
Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
Solid earnings from Boeing (BA) and Amazon.com (AMZN) soothed Wall Street's frazzled nerves yesterday, and the market responded by taking back a portion of Tuesday's 226-point whipping. The strong earnings even made up for Cerberus Capital Management's failure to follow through with a leveraged buyout of Chrysler Corp. and a report that June existing home sales were twice as bad as expected.
There were also some minor buyout announcements, such as Merck's (MRK) purchase of NovaCardia, Inc. for $350 million in stock and The Pittsburgh Bank holding company's offer to buy Sterling Financial Corp. (SLF) of $565 million. Both Wells Fargo & Co. (WFC) and Reynolds American (RAI) announced a dividend increase. And to cap off a day of relatively good news, even the beleaguered U.S. dollar rallied to a two-week high against the euro.
At the end of trading, the Dow Jones Industrial Average was up 68 points at 13,785. The S&P 500 gained 7 at 1,518, and the Nasdaq gained 8 to close at 2,648. The NYSE traded 2 billion shares and 2.5 billion traded on the Nasdaq. But breadth was negative on both exchanges: 19/13 on the NYSE and 16/13 on the Nasdaq.
Crude oil (September contracts) gained $2.32, closing at $75.88 following a Department of Energy report that supplies fell for the third consecutive week. The Amex Energy SPDR (XLE) gained $1.00 and closed at $73.15. Gold (August contracts) fell by $11 per troy ounce and closed at $673.80, and the Philadelphia Gold/Silver Index [XAU] lost $2.10 to close at $153.32.
What the Markets Are Saying
Yesterday's rebound was a welcome relief following the broad-based drubbing on Tuesday. But the negative breadth on both the NYSE and the Nasdaq left us hanging as to the market's near-term direction and didn't erase the possibility of a "failed breakout" last Thursday.
There is a lot of support under the major indexes with a 1,487 to 1,539 range on the S&P 500. And Tuesday's sell-off, with high volume and one of the highest readings on record for a ratio called the "down/up volume ratio," is more characteristic of a selling climax than the beginning of a new trend. Other measures of the sell/buy balance almost hit records, too. So unless the June lows are violated, we must remain cautious bulls in an ever-changing environment.
Today's Trading Landscape
Look for earnings today from 3-M (MMM) (read above), Aetna (AET) (read above), Amgen (AMGN), Apache Corp. (APA) (read above), Becton Dickinson (BDX), Benchmark Electronics (BHE), Black & Decker (BDK), BorgWarner (BWA), Bristol-Myers Squibb (BMY) (read above), Celanese (CE), Celgene (CELG), Consol Energy (CNX), Digital River (DRIV), Exxon Mobil (XOM) (read above), L-3 Communications (LLL) (read above), McKesson (MCK), Verisign (VRSN), Weingarten Realty Investors (WRI), XM Satellite (XMSR) and others. The durable goods report will be delivered today along with the ever-scrutinized new home sales figures (look for a 2.7% drop).
After the close yesterday, Apple Corp. (AAPL) reported Q3 earnings of 92 cents -- analysts were looking for 72 cents, so it was a big boost for tech stocks. QUALCOMM (QCOM) and Dow Chemical (DOW) exceeded estimates, as well, but higher crude prices and Moody's (MCO) negative comments about the credit markets have the market nervous this morning.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Decline, Led by BHP, Miners on Metals Prices; Nomura Surges Asian stocks fell the most in a month after Nippon Electric Glass Co. and Advantest Corp. (ATE) reported lower earnings and metals prices slumped.
• Ford Says Report Tata to Buy U.K. Units Jaguar, Land Rover Is Speculation Ford Motor Co. (F), the second-biggest U.S. automaker, said a CNBC-TV18 television report that Tata Motors Ltd. (TTM) will purchase the Jaguar and Land Rover brands is ``speculation.''
• Maruti's Profit Surges 35 Percent on Indian Demand for SX4, Swift Cars Maruti Udyog Ltd., maker of half the cars sold in India, reported record profit that exceeded analyst estimates in the first quarter as it introduced new models and a stronger currency cut import costs.
European Headlines (via Bloomberg.com)
• German Business Confidence Drops for Second Month as Growth Loses Momentum German business confidence fell for a second month in July as the euro's gains and rising oil prices threaten to curb growth in Europe's largest economy.
• AstraZeneca More Than Doubles Planned Job Cuts as Profit Drops 11 Percent AstraZeneca Plc (AZN), the U.K.'s second- largest drugmaker, will more than double the number of planned job cuts after quarterly profit fell 11 percent on costs related to the $15.2 billion acquisition of MedImmune Inc. (MEDI)
• ABB Second-Quarter Profit Almost Doubles on Asian, Mideast Power Grids ABB Ltd. (ABB), the world's largest builder of power grids, reported a record quarterly profit after it sold more transformers, switchgear and substations to clients in China and the Middle East.
• Scania Has Seventh Straight Profit Gain on Eastern Europe, Russia Growth Scania AB, Sweden's second-largest truckmaker, had a seventh straight profit gain in the second quarter as customers expanded in eastern Europe and Russia.