Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:50 AM ET
S&P 500: +6.50; 1464.50
NASDAQ 100: +9.00; 1972.50
Dow: +56.00; 13340.00
NIKKEI 225: +0.03%; 17,289.30 (+5.49)
HANG SENG: +0.75%; 22,739.90 (+169.49)
SHANGHAI SE COMPOSITE: +2.20%; 4,440.77 (+95.41)
BSE SENSEX 30: +0.17%; 15,260.91 (+26.34)
FTSE 100: -0.05%; 6,212.30 (-2.90)
CAC 40: +0.22%; 5,656.57 (+12.61)
XETRA-DAX: -0.10%; 7,444.35 (-7.33)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.40%; $76.71 (-$0.31)
Gold: +0.01%; $672.40 (+$0.10)
Natural Gas: +2.64%; $6.37 (+$0.16)
Silver: +0.16%; $12.735 (+$0.02)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Verizon Posts Mild Q2 Miss; Buys Rural Cellular
Number-two U.S. phone company Verizon Communications said Monday Q2 profits rose a mild 4.5% from a year ago as new signups of 1.3 million wireless customers trailed those of rival AT&T. EPS were $0.58 ($1.68 billion), up from $0.55 last year but short of the $0.59 analysts expected. Sales climbed 6.3% to $23.3 billion, stronger than the $23 billion analysts were calling for. Verizon continued its industry-leading low churn rates: retail churn was 1.08%, and a company-record 0.85% among post-paid customers. In other sections, Verizon signed up 203,000 new internet users and 167,000 subscribers to its new fiber-optic TV network -- beating estimates of UBS analyst John Hodulik who was calling for 200,000 and 160,000 respectively. "Verizon's strategy of focusing on organic revenue growth and improving margins continues to gain momentum," said Chairman and CEO Ivan Seidenberg. "Results show that we are producing accelerating -- and sustainable -- top- line growth across all key markets." In a June 25 note titled "Investment Controversy, iPhone: Competitor Killer for AT&T, Or Stimulant for the Overall Market?" Cowen & Co. said it expects the iPhone rollout, which is carried exclusively by AT&T, to have only limited impact on Verizon. Separately, Verizon Wireless -- Verizon Communications' joint venture with Vodafone -- said Monday it will buy Rural Cellular Corp. in a deal worth about $2.67 billion ($45/share) including assumed debt. "The addition of Rural Cellular's markets will enable us to expand our services into areas where previously we had little or no presence," Verizon Wireless CEO Lowell McAdam said. Verizon shares are up 0.5% in pre-market trading. Rural Cellular shares are up 35% to $42.70.
Sources: Press release I, II, Bloomberg, Wall Street Journal
Commentary: Verizon Delusional On iPhone Impact • Telecom Meets Web 2.0 - Who Wins?
Stocks/ETFs to watch: VZ. Competitors: T, S, Q, DT, CMCSA. ETFs: FDL, IYZ, IXP
Earnings call transcript: Verizon Q1 2007
Archer Daniels Midland 4Q Net Jumps on Asset Sales, Beats Street
Archer Daniels Midland [ADM] reported 4Q net income jumped 133% to $955 million, or $1.47/share, boosted by $616m of asset sales, on a 28% increase in total sales to $12.21b. Adjusted EPS of $0.64 beat analysts' average estimate of $0.59. In a press release, ADM said oil seeds processing operating income was helped by a $440m gain from an asset transfer in China. However, excluding the gain, segment operating profit declined. Corn processing operating profit also declined, due primarily to lower ethanol sales volumes and higher net corn costs. Shares of ADM were last up 4% to $35.40 in very thin pre-market trading. Archer Daniels Midland lost 1.9% to $34.05 on Friday and has traded in a range of $30.20 - $45.05 over the past year.
Sources: Press release, Reuters
Commentary: ADM Will Control Corn Cost - And Ethanol Profits - With Latest Deal • Ethanol Slump Starting to Ease; Earnings Season to Set Tone • Why Are Ethanol Investors Shunning Optimist News?
Stocks/ETFs to watch: Archer Daniels Midland Co. (ADM). Competitors: BG, CPO
Tyson Reports Beat and Raise Quarter
Tyson Foods returned to profitability in 3Q with net income of $111 million, or $0.31/share after a loss of $52m, or -$0.15 last year. Analysts had forecast $0.25/share on average. Tyson raised its fiscal 2007 earnings guidance to $0.82 - $0.92 per share, versus its prior broad projection of $0.50 - $0.80. Analysts were expecting EPS of $0.85. Third-quarter sales increased 9% to $6.96b, topping the Street's $6.74b consensus estimate. Tyson's chicken segment posted a profit of $95m, compared to a loss of $59m last year, as wholesale breast meat prices rose 44% y/y. Beef profits totaled $33m versus a $10m loss last year. Shares of Tyson are untraded so far in pre-market activity. Tyson lost 2.7% to $21.41 on Friday.
Sources: Press release, Bloomberg, MarketWatch
Commentary: 100 Stocks to Offset Rising Food Prices • Tyson Foods, Syntroleum Corp to Manufacture Chicken Fat Fuel • More Than Just Chicken In Every Tyson Family Pot
Stocks/ETFs to watch: Tyson Foods Inc. (TSN). Competitors: PPC, SFD, HRL. ETFs: RHS
Monster Worldwide Misses On All Counts, Will Lay Off 15% of Workforce
Job search site Monster Worldwide reported 2Q net income of $28.6 million, a 28% drop from the prior year period, as legal fees related to a stock options probe knocked $0.10 off EPS. EPS were $0.21, and would have been $0.32 were it not for one-time items. Revenue rose 20% y/y to $331 million; consensus estimates were for EPS of $0.34, on revenuesof $337 million. Monster suffered due to a rise in operating expenses, which climbed to $288.8 million, from $215.9 million a year earlier. The company reported N. American job-listing revenue of $174.5 million. Monster lowered its full year revenue forecast to $1.34 billion -$1.37 billion from a previous range of $1.36 billion-$1.40 billion. Analysts were looking for FY revenues of $1.37 billion. Monster plans to cut 800 jobs, roughly 15% of its workforce, to rein in costs. The company believes it will save as much as $170 million a year as a result of the layoffs. Shares were higher by $0.53 in pre-market action.
Sources: Press Release, Bloomberg, Reuters, AP
Commentary: Monster Worldwide: Likely Takeover Target • Monster Unlikely to be Acquired - AmTech • Citi Likes Monster Worldwide's Long-Term Thesis, But Market May Not
Stocks/ETFs to watch: MNST. Competitors: YHOO, KFRC. ETFs: FDN
Conference call transcripts: check back later today for MNST's most recent conference call transcript • Monster Worldwide Q1 2007
ValueClick Misses Estimates, Guides Down
Internet advertising company ValueClick Inc. said Monday Q2 profit rose 22% to $17.6 million ($0.17/share) from $14.4 million ($0.14) a year ago -- just short of analyst estimates of $0.18/share. Shares dropped 19% in pre-market trading after the company lowered its 2007 EPS estimate from $0.79-0.81/share to $0.74-0.76. Sales revenue climbed to $148.7 million from $130 million. "The promotion-based sector suffered a downturn that began in late May and became more pronounced in June, which negatively impacted our quarter," said CEO Tom Vadnais. "We have reassessed our outlook on the promotion-based business and have taken aggressive steps to bring its costs in line with the changes occurring in this part of the industry. We expect to see the full impact of this cost-cutting initiative in the fourth quarter." ValueClick's Q2 earnings call is scheduled for 8:30 a.m. ET (transcript later today).
Sources: Press release, Bloomberg, MarketWatch
Commentary: ValueClick Stock Finally Losing Steam • ValueClick Names New CEO; Takeover Hopes Fade • Will ValueClick Be The Next Online Ad Firm To Get Acquired?
Stocks/ETFs to watch: VCLK. Competitors: AQNT
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 Last Week's Action
Despite an excellent second-quarter gross domestic product [GDP] report that showed an increase of 3.4% (when 3.2% was expected) and better earnings from a number of key companies, the market continued to focus on credit worries at the end of last week.
Thursday's lower housing numbers and fear that consumers will fail to come through in the second half of the year dominated trading. A statement from the California State Teachers' Retirement System that it has been selling and will stay out of stocks for a bit didn't help matters. Friday was characterized by fear of what might happen, rather than what has happened, chief of which is the possible spread of bad loans in several sectors and a reduction in the M&A deals that have fueled much of the market's strength this year.
Despite the best consumer sentiment number since February that exceeded June's by almost 5%, there were a number of comments suggesting that consumers may not be quite so active in the second half of '07.
On the wild week's last trading day, stocks were making a recovery from the noon lows and, just before 3 p.m., it even looked like we might have a positive close, but a late influx of selling cut that short. In the last half-hour of trading, the Dow Jones Industrial Average lost almost 150 points as traders attempted to avoid unforeseen financial stumbles during the weekend.
At the close, the Dow Industrials were off 208 points at 13,265. The S&P 500 lost 24 at 1,459, and the Nasdaq fell by 37 to close at 2,562. The NYSE traded 2.3 billion shares, and 2.7 billion shares crossed on the Nasdaq. Breadth was negative on both exchanges by an average of about 4/1.
Crude oil (September contracts) closed at $77.02 a barrel, up $2.07 for the highest closing price since August 2006. The Amex Energy SPDR (XLE) lost $2.20, closing at $68.50. Gold (August contracts) fell $2.70 per troy ounce to $660.10 -- its lowest level since early July -- and the Philadelphia Gold/Silver Index [XAU] followed by losing $2.40 to close at $144.82.
Despite a record high for the Dow Industrials at just over 14,000 the week before, the DJIA suffered its worst weekly decline in over 3 1/2 years, closing lower by 4.2%. The S&P 500 fell 4.9% and the Nasdaq lost 4.7% for the week. And the S&P 500 saw its worst weekly decline in points since the week following Sept. 11.
What the Markets Are Saying
After a beating like last week's, few could remain unfazed by the avalanche of selling and the shock of sudden reversals from the week before -- when stocks looked like they were about to jump to a new plateau.
In just one week, all short-term support crumbled as the 20- and 50-day moving averages for all of the major indexes were violated. Then on Thursday, stocks easily sliced through the June lows, which defined the intermediate support zones that we've been talking about for weeks.
Friday failed to reverse the losses and in the last hour of trading seemed to confirm that the selling was not over with. But with the S&P 500 now at just 15.5 times earnings (hardly expensive) and Q2 earnings strong, the fundamentals argue against a major decline.
We know from past bull markets that sell-offs like this are not unusual, and yet we haven't had a single major correction of 10% or better since the bear went off to slumber 4 1/2 years ago -- the Feb. 27 correction amounted to just 6.2%. Corrections of 10% to 15% are commonplace and usually result from traders who overextend their margin accounts and thus experience a sudden loss of confidence.
It is more than just coincidence that only two weeks ago the NYSE reported almost-record margin debt. It is impossible now to make an accurate prediction as to how much more selling we will get. Last week bore all of the characteristics of an emotional selling climax; however, markets could drift lower before a bottom is set.
Today's Trading Landscape
Quarterly earnings reports are due today from Advanced Analogic (AATI), Alberto Culver (ACV), Allied Cap (ALD), Anadarko (APC), Archer Daniels Midland (ADM) (read above), Community Health Systems (CYH), Florida Rock (FRK), Fording Canadian Coal (FDG), Health Care Property Investors (HCP), Healthcare Realty Trust (HR), Humana (HUM), Loews (LTR), Pitney Bowes (PBI), Radioshack (RSH), Sun Microsystems (SUNW), Superior Energy (SPN) and Verizon Communications (VZ) (read above) as well as others.
There are no major economic reports due today. China raised credit requirements for the sixth time, so markets will focus on that.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Rebound From 1-Month Low; JFE, Nippon Steel Rise, Canon Falls Asian stocks rebounded from a one-month low after higher profits at JFE Holdings Inc. and Nippon Steel Corp. offset concern U.S. housing investment is dropping.
• Tata Steel Posts Record First-Quarter Profit, Helping Fund Corus Purchase Tata Steel Ltd. reported a record first-quarter profit as demand from construction companies and carmakers boosted prices, easing the financing burden of its $12.9 billion takeover of Corus Group Plc.
• Reliance Energy Wins Contract to Build $4.9 Billion Plant, Shares Surge India's Reliance Energy Ltd. won a contract to build a 4,000-megawatt plant in central India, which will increase its generation capacity fivefold. Shares surged.
• Nippon Steel Profit Rises as Demand for Cars, Ships Boosts Metal Prices Nippon Steel Corp., the world's second-biggest producer, said first-quarter profit gained 16 percent as rising global demand for cars and ships allowed it to pass on increased material costs.
European Headlines (via Bloomberg.com)
• ICI Rejects Sweetened Offer of $16 Billion From Dutch Rival Akzo Nobel Imperial Chemical Industries Plc, the U.K. maker of Dulux and Glidden paints, rejected a sweetened 7.77 billion-pound ($16 billion) bid from Akzo Nobel NV (OTCQX:AKZOY) of the Netherlands as too low.
• Telefonica Says Profit Doubles, Raises Full-Year Sales, Earnings Forecasts Telefonica SA (TEF), Europe's second- largest telephone company, raised sales and earnings forecasts for 2007 after second-quarter profit more than doubled on broadband customer growth in Spain and Latin America.
• KPN, Largest Dutch Phone Company, Agrees to Buy Getronics for $1 Billion Royal KPN NV (KPN), the largest Dutch phone company, agreed to buy Getronics NV for 766 million euros ($1.04 billion) to offer more computer services for businesses as it loses fixed-line phone customers.