U.S. Foreclosure Filings Shoot Up -- RealtyTrac
U.S. foreclosure filings surged 58% in H1 2007, with California skyrocketing 170% and Florida up 77%, according to foreclosure data company RealtyTrac Inc. A total of 573,397 homes were subject to some form of foreclosure filing in the period, including default notices, auctions and repossessions. Homeowners with adjustable rate mortgages (ARMs) whose monthly payments have gone up are finding it increasingly difficult, in the current environment, to sell or refinance their homes in order to avoid default. The inventory of homes for sale in June matched May's figure at 8.8 months, the highest in fifteen years. "Foreclosure activity shows no sign of slowing down," said RealtyTrac CEO James Saccacio. "We could easily surpass 2 million foreclosure filings by the end of the year, which would represent a year-over-year increase of over 65%."
Sources: Press release, Reuters, Forbes, Bloomberg
Commentary: Optimism Takes a Hit as Real Estate Continues to Slump • Weak Home Sales, Tightening Credit Standards = Multiple Mortgage Apps • Subprime Jumps the Fire Line - Again
Stocks/ETFs to watch: DSL, CFC, CORS. ETFs: PEY, RPV, RYF
Earnings call transcripts: Countrywide Financial Q2 2007
Alcatel Swings To Loss, Misses Estimates; Shares Fall In Paris
Networking equipment maker Alcatel-Lucent reported Tuesday a loss in Q2, as well as a 3.6% decline in revenue, sending shares 5.8% lower in Paris trading. The company, formed through a cross-Atlantic merger between Alcatel and Lucent last year, posted a net loss of €336 million versus a net gain of €302 million a year ago. Revenue came in at €4.33 billion, versus €4.49 billion, beating consensus estimates of €4.26 billion. At constant currency rates, revenue would have risen 13%, above the company's guidance of 10% sequential growth (see full summary). Alcatel reported an operating loss of €19 million, compared to analysts' expectations of €85 million in operating profits. CEO Patricia Russo: "The gross margin was lower than we would have liked." Russo blamed "an unfavorable product and geographic mix as well as some impact from product related transition costs," adding, "the gross margin level this quarter is not indicative of the business going forward." Alcatel reaffirmed it's full year guidance for mid-single digit revenue growth at constant currency rates, implying greater second half sales. Alcatel saved €600 million in pretax cost savings in 2007, in-line with its projections of €1.7 billion in synergies resulting from the merger within three years. Alcatel laid off 1,900 employees during the recent quarter as part of its post-merger savings plan. Check later for ALU's conference call transcript.
Sources: Press Release, Wall Street Journal, Reuters, Bloomberg, MarketWatch
Commentary: Alcatel-Lucent Awarded Cricket Contract, Joining Nortel, Huawei • Is the Corporate World Prepared For the Upcoming Bandwidth Boom? • Alcatel-Lucent Reports Lower Q1 Revenues, Operating Loss; Shares Rallying
Stocks/ETFs to watch: ALU. Competitors: CSCO, ERIC, NOK, NT, SI. ETFs: BDH, IGN
Earnings call transcript: Alcatel-Lucent Q1 2007
Sun Microsystems Jumps 10% on Q4 Earnings Beat
Share of Sun Microsystems were last up 10% in after-hours trading following the company's announcement of a swing to profitability in Q4 and better-than-expected earnings. Net income totaled $329 million, or $0.09 versus a $0.02/share loss last year, while sales rose slightly to $3.84b, compared to analysts' average estimate of $0.05 on sales of $3.83b. Services revenues rose about 3% to $1.34b, but products revenues fell over 1% to $2.49b. Sun reduced its operating expenses by 25% to $1.49b, with the largest cuts recorded in SG&A expenses -- its highest area of operational costs -- reducing the costs to 25% of sales compared to 30% last year. Operating profit margin of 8.5% beat its earlier forecast of 4.0%. During its conference call Sun executives said they expect full-year (FY'08) sales growth in the low to mid-single digits. Profit margin of at least 8% is forecast for 4Q'08. See Sun's earnings call transcript.
Sources: Press release, MarketWatch, Reuters
Commentary: Sun To Release Earnings Online Prior To Press Release Monday • Four Key Developments In the Linux Market • Sun to Buyback $3B in Stock, Offset Options Dilution, Shares Trade Higher
Stocks/ETFs to watch: SUNW. Competitors: IBM, HPQ, DELL, EMC, SGIC, ORCL. ETFs: IAH, PHW
Related: Earnings presentation slides
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 are down more than 20% 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." JMP Securities was less optimistic in its post-earnings note: "This is the first quarter that ValueClick has missed our expectations and its financial guidance since we have been covering the stock in the past six years," analyst Bill Morrison wrote. "Our experience suggests that its challenges within its lead generation business are likely to take several quarters to fix." 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
Murdoch Might Have Enough Bancroft Votes to Clinch
Dow Jones shares shed 5.3% to close at $51.56 Monday on concerns that the controlling Bancroft family will nix News Corp.'s proposed $5 billion takeover of the company. Late in the day, however, the sides appeared to approach agreement. Dow Jones has proposed that News Corp. sway holdouts by paying fees of about $30 million that have accrued to firms advising the Bancrofts. News Corp. would assume that liability provided one of two family "no" votes, either Christopher Bancroft or the so-called Denver trusts, agree to the deal. As of late Monday, neither had agreed, although Bancrofts holding 29% of the vote appear to be supporting the sale. Murdoch needs approximately 30% of the family's votes to clinch, since the vast majority of the 29% stake held by common stockholders is expected to be cast in favor. The News Corp. board of directors will meet Tuesday at 5:00 pm to decide whether or not to proceed in the face of such a slim margin of error. The Dow Jones board will meet at 7:00 pm. Meanwhile, MySpace cofounder Brad Greenspan, who hopes to scupper the News Corp. deal, said he has identified five investor groups who would be interested in taking a stake in Dow Jones. They are Intel Capital, Apex Partners, Jana Partners, a unit of Softbank Corp. and Trafelet.
Sources: Wall Street Journal, Bloomberg, Reuters, Business Week, Forbes
Commentary: Bancrofts Continue to Wrangle on Murdoch Bid • Bancroft Decision on Murdoch Bid Too Close to Call • At Long Last, Dow Jones And News Corp. Reach (Possible) Deal
Stocks/ETFs to watch: DJ, NWS. Competitors: RTRSY. ETFs: PBS
Earnings call transcripts: Dow Jones Q2 2007, News Corporation F3Q07
Peltz Ready to Bid Up to $41/Share for Wendy's
Billionaire investor Nelson Peltz, who owns fast-food chain Arby's, as well as a stake in Wendy's Intl., said he is prepared to offer $37-$41 a share for the third-largest hamburger chain in the U.S.. In a letter to Wendy's chairman James Pickett, which was filed with the SEC, Peltz said Arby's, would be a "natural, strategic buyer" for Wendy's. Peltz's Trian Fund, which recently increased its holdings in Wendy's to 9.8%, has been pushing for the company to increase shareholder value, including a spin-off of the Tim Hortons coffee chain. Wendy's had said in April that it was exploring a sale of the company, a move CEO Kerrii Anderson said was driven by the board, which includes three Peltz nominees. Peltz's strategy also has led to the sale of the Baja Fresh chain to an investment group. Arby's, which is controlled by Peltz's Triarc Cos., operates more than 3,000 restaurants. Wendy's operates some 6,600 restaurants. Wendy's jumped 81 cents to $34.50 AH after rising 16 cents to $33.69 Monday.
Sources: AP, CNBC
Commentary: Wendy's International: Peltz Wants His Triarc Unit to Participate in Sale Process • A Final Word On Wendy's
Stocks/ETFs to watch: WEN, TRY. Competitors: MCD, YUM
Foot Locker, Confronting a Loss, Is Exploring Strategic Options
Athletic shoe retailer Foot Locker, faced with its first loss in six years, has hired Lehman Brothers to assist it in pursuing a possible sale. Several private equity firms have already expressed interest. Foot Locker, which tried unsuccessfully to buy Genesco Inc. in April, revised its Q2 earnings guidance to a net loss of $0.17-0.20 per share from a prior forecast of net income of $0.15-0.20. Analysts had been expecting profit of $0.16. The company spent $55 million ($0.22/share) in the quarter on liquidation of slow-moving merchandise. It is also considering closing 250 of its 4,000 stores this year, twice its previous estimate. The company's shares closed down 1.3% at $18.80, their lowest point since November 2003.
Sources: Bloomberg, TheStreet.com, Dow Jones
Commentary: Foot Locker: Management Dedicated to Increasing Shareholder Value • Foot Locker Ends Pursuit of Genesco
Stocks/ETFs to watch: FL, LEH. Competitors: FINL, SRR. ETFs: RTH, XRT, PMR
TRANSPORT AND AEROSPACE
B/E Aerospace Beats Q2 Estimates on Growing Backlog
B/E Aerospace Inc. said Tuesday Q2 earnings climbed 52% on a 47% revenue jump, beating analyst estimates. It also raised its full-year outlook. EPS after one-time items were $0.39 ($28.4M) up from $0.24 ($18.7) a year ago. Revenue was $398M vs. $271M last year. Analysts were looking for $0.37/share on $390M revenue. Backlog was up 30% to $1.9 billion. B/E Aerospace guided up $0.02 to $1.57 for full-year earnings. Analysts had been looking for $1.59. "Industry experts expect air traffic growth to outpace capacity growth for some time to come. All indications are that the current commercial aircraft new-build delivery cycle both for wide-body and narrow-body aircraft will remain very strong well into the next decade, driven by the escalating need for more fuel-efficient aircraft and the growing importance of emerging countries," CEO Amin Khoury said. "Our long-term visibility arising from current backlog and associated expected follow-on orders, together with a nascent domestic market awakening serve as the foundation for our expectation of continued strong revenue and earnings growth for the next several years."
Sources: Press release, MarketWatch
Commentary: BE Aerospace Stock: Flying High In Comfort • B/E Aerospace Posts Sharp Rise in Q1 Profit; Beats Street; Raises Guidance
Stocks/ETFs to watch: BEAV. Competitors: BA, HON, LMT. ETFs: ITA, PPA
ENERGY AND MATERIALS
Anadarko Earnings Fall But Top Forecasts
Anadarko Petroleum posted second-quarter earnings that fell 20% on higher tax payments but still topped analysts' forecasts as revenues spiked 83%. The independent oil and gas producer said it earned $652M ($1.39/share), excluding items, on revenue of $3.31B compared with earnings of $814M ($1.76/share) on revenue of $1.81B a year ago. Analysts had expected earnings of $0.79/share and revenue of $2.49B, on average. Income from continuing operations was $645M ($1.38/share). Operating income was $1.4B, up from $968M last year. Anadarko said cash flow from continuing operations ($229M) and discretionary cash flow ($174M) were reduced by $1.1B as a result of income tax payments associated with its divestiture program. The company already has sold assets worth at least $12.5B and plans to sell as much as $15 billion more this year. Total costs in the quarter jumped to $1.93B from $841M. Sales volumes rose to 52M barrels of oil equivalent from 36M BOE a year ago. The company also raised its production guidance for the year to a range of 189M-193M BOE, an increase of 3 million barrels from the previous midpoint. Anadarko shares rose 1% ahead of the report to close at $50.10 and added another 0.2% to $50.20 AH.
Sources: Press release, Bloomberg
Commentary: Anadarko Petroleum: Natural Gas Project Ahead Of Schedule • Where is the North American Natural Gas Market Headed? • Anadarko Petroleum: Avarice in Algiers
Stocks/ETFs to watch: APC. Competitors: XOM, COP. ETFs: IEO, PRFE, RYE
MGIC Investment, Radian Shares Plunge On Likely $1 Billion Writedown
Shares of mortgage insurers MGIC Investment Corp. and Radian Group Inc. fell sharply in after-hours trading Monday on news they would likely have to write down most or even all of their $1.03 billion joint venture, Credit-Based Asset Servicing and Securitization LLC [C-BASS], which aims to buy mortgages with overdue payments and improve the collection rates before reselling the debts at a profit. The companies, which agreed to merge in February, saw their shares fall 2.26% [MGIC] and 3.18% [Radian] during regular trading yesterday, amid widespread market gains. Shares tanked after hours as news of the probable writedown broke at 6 p.m. ET. By the time trading came to a halt, MGIC's and Radian's shares were down 11.97% and 7.96% respectively. During the first quarter, MGIC saw its net income fall by 43%, on mortgage-based losses of $181.8 million (see full summary), while profits fell 49% in the recent-ended quarter. Radian, meanwhile, has seen its shares fall for 12 consecutive days, and 40% since announcing the merger with MGIC. Radian said sales of traditional mortgage insurance jumped 60% in Q2 to $10.64 billion, adding to investor concerns it will bear the brunt of further fallout in the U.S. housing market. The companies say the merger is moving forward as planned.
Sources: Press Release I, II, Bloomberg, Reuters, Philadelphia Inquirer
Commentary: MGIC's Q1 Earnings Miss, Losses Jump, but Delinquencies Slightly Lower • Radian: MGIC Merger Looks Promising • MGIC Investment Corp. to Buy Radian for $4.9 Billion in Stock
Stocks/ETFs to watch: MTG, RDN. Competitors: PMI, GNW, TGIC, AGO, BCIS
FDA Panel: Glaxo's Avandia Can Stay on the Market
GlaxoSmithKline ADRs gained 5.5% to $52.15 in AH trading Monday after an FDA advisory panel refrained from recommending that its diabetes drug Avandia (rosiglitazone) be pulled from the market despite increased risk of heart attack. Avandia was Glaxo's second-biggest-selling drug in 2006 with global sales of $3.38 billion. Several panel members favor a stiffer warning label for Avandia rather than its full withdrawal. One possible beneficiary of a black-box or other new warning on Avandia could be Takeda Pharmaceuticals, which produces Actos, Avandia's only direct rival. Actos has not been tied to increased heart attack risk. The FDA panel showed signs of sharp disagreement before its decision, with two officials, David Graham and Gerald Dal Pan, arguing that Avandia's risks outweigh its benefits. "If rosiglitazone increases the cardiovascular risks, a wrong decision will cost thousands of lives," Graham said. The panel ultimately voted 20-3 that the drug increased ischemic (heart attack) risk but voted 22-1 to keep it on the market. Glaxo has argued consistently that Avandia does not increase heart attack risk. "The number of myocardial infarctions is small, the data are inconsistent and there is no overall evidence rosiglitazone is different from any other oral antidiabetes agents," said Glaxo's chief medical officer Dr. Ronald Krall.
Sources: Wall Street Journal, AP, Dow Jones, Bloomberg
Commentary: GlaxoSmithKline Wins The Latest Round on Avandia • GlaxoSmithKline Defends Avandia Against Charges of Cardiovascular Risks • FDA Wants Black Box Warning on Glaxo's Avandia and Lilly's Actos
Stocks/ETFs to watch: GSK. Competitors: TKPHF.PK, MRK, AMLN. ETFs: EKH, OTP
Earnings call transcripts: GlaxoSmithKline Q2 2007
Related: WSJ health blogger Jacob Goldstein discusses latest Avandia news
Paulson Makes Diplomatic Attempt to Urge Yuan Appreciation
U.S. Treasury Secretary Henry Paulson is on his fourth visit to China in an official capacity, in what has become a challenging situation of trying to win concessions from China, while appeasing increasingly impatient U.S. lawmakers. Paulson's top priority is persuading Beijing to allow for faster appreciation of the yuan, which is expected to ease China's massive trade surplus with the U.S. and slow its $1.3 trillion and growing foreign currency reserves. Chinese officials however, fear potential adversarial conditions resulting from export-related job losses and the inability of its large peasant class to compete against cheaper food imports. Paulson is also attempting to open China more to foreign competition, particularly in financial services. Vice Premier Wu Yi took advantage of the fact Paulson's first stop is in the relatively poor province of Qinghai. She commented, "China still has 23 million people living in poverty. China's very goal in its development is so that its 1.3 billion people can eat their fill, dress warmly and live well. Who could we threaten? We don't have the ability. China does not and will never threaten anyone."
Sources: Reuters I, II
Commentary: Chinese Regulators Raise Interest Rates, Limit Credit Creation Growth • Beijing 'Tightening' Talk Based On Questionable Assumptions
Stocks/ETFs to watch: Bond funds: SHY, IEF, TLT. Currency funds: DBV, FXE, FXY. China funds: CAF, FXI, PGJ
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