Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 9:00 AM ET
S&P 500: +6.50; 1,476.50
NASDAQ 100: +9.50; 1,970.00
Dow: +28.00; 13,432.00
NIKKEI 225: +0.67%; 16,984.11 (+113.13)
HANG SENG: -0.05%; 22,443.25 (-12.11)
SHANGHAI SE COMPOSITE: +2.49%; 4,407.73 (+107.17)
BSE SENSEX 30: +0.33%; 14,985.70 (+49.93)
FTSE 100: +1.03%; 6,314.80 (+64.20)
CAC 40: +1.08%; 5,715.39 (+61.09)
XETRA-DAX: +1.22%; 7,565.01 (+91.08)
Commodity Futures (Reuters/Jefferies CRB)
Oil: -0.39%; $76.23 (-$0.30)
Gold: +0.34%; $678.20 (+$2.30)
Natural Gas: +0.28%; $6.37 (+$0.02)
Silver: +0.81%; $13.060 (+$0.105)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Nokia Shares Jump on 2Q Earnings Beat, Margin Expansion
Shares of Nokia trading in Helsinki are up 7.5% to €22.15 in early afternoon trading, on news the company's 2Q net income more than doubled to €2.83 billion ($3.87b), or €0.72/share, with adjusted EPS of €0.32 beating analysts' average estimate of €0.28. Sales growth of 28% to €12.6b however, missed analysts' forecast of €12.9. Nokia reported operating margin increased to 18.7% from 15.3% last year. Its global market share of mobile handsets expanded to 38%, from 36% in 1Q and 34% last year, with more gains expected in the current quarter. A Helsinki-based analyst commented, "Motorola's capitulation in the second quarter has paved the way for Nokia to take full advantage of its strong low-end portfolio without facing major price pressure." Nokia's ADRs are tracking ordinary share gains, last up 7.5% to $30.53 in the pre-market. Nokia's earnings call is at 8 a.m. EDT. Check for Nokia's earnings call transcript later today."
Sources: Press release, Bloomberg, MarketWatch
Commentary: Nokia Reportedly Makes $7 Billion Takeover Bid For Tellabs • Motorola’s Failures Positive For Nokia • Apple's iPhone Has Boosted Stock of Rival Handset Producers
Stocks/ETFs to watch: NOK. Competitors: MOT, ERIC, SNE, Samsung [not traded in the U.S., but an 18% component of iShares MSCI S. Korea (EWY)], AAPL, PALM, RIMM. ETFs: MTK, WMH
Viacom 2Q Net Slips, But EPS, Sales Beat
Viacom reported a slight decline in 2Q net income to $434 million, but EPS increased y/y to $0.63 from $0.61. Adjusted EPS of $0.54 beat analysts' average estimate of $0.50. Sales growth of 13% to $3.19b also topped estimates of $3.07b. Media Networks revenues rose 10% to $1.92 b, while sales at its Filmed Entertainment unit climbed 20% to $1.31b. Operating income increased 6% helped by a more than tripling of profits to $21.4m for films and a modest 3% rise to $734.2m for media networks. Third quarter earnings are expected to be boosted by strong sales of the hit film "Transformers," which has earned $287.6m in theaters as of July 29. Production costs were booked in 2Q. Viacom repurchased $561m of its common stock during the quarter of an authorized $4.0b announced in late May. Viacom's earnings call is at 8:30 a.m. Check for Viacom's earnings call transcript later today. Shares of Viacom lost 1.2% to $38.00 on Wednesday.
Sources: Press release, Bloomberg
Commentary: Shari Redstone May Leave Viacom After Feud With Father • Viacom: Net Down 36% on MTV Costs, But Adjusted EPS Beats Street • Google’s Viacom Suit Response: A Cut And Paste Job
Stocks/ETFs to watch: VIA. Competitors: DIS, GE, NWS, TWX. ETFs: FPX, XLY, PBS
Related: Viacom 2Q earnings presentation [pdf]
Nortel Falls On Across the Board Earnings Miss
Shares of Nortel Networks fell 3.3% in pre-market trading as the company swung to a loss in its recently ended second quarter. Net income was -$37 million, good for EPS of -$0.07, versus EPS of $0.79 a year ago. Revenue was down 8% to $2.56 billion. Analysts were expecting EPS of $0.08 on revenue of $2.75 billion. On a positive note, gross margins were 41%, their highest level in eight quarter. Nortel blamed the timing of contract expirations and its UMTS divestiture for its weak y/y results. The company expects revenue to remain flat to slightly lower for the remainder of the year. (Check back later for NT's earnings call transcript.)
Sources: Press Release, Reuters, MarketWatch, TheStreet.com,
Commentary: Nortel Has 3Com In Its Sites • Nortel-Microsoft Alliance Pays Off • SEC to Fine Nortel Up To $100 Million in Accounting Fraud Settlement
Stocks/ETFs to watch: NT. Competitors: ALU, ERIC, CSCO. ETFs: BDH, IGN, MTK
Conference call transcripts: Nortel Networks Q1 2007 Earnings Call Transcript
CVS Doubles Net Post Caremark Merger
CVS Caremark said Thursday second-quarter net income more than doubled to $723.6 million ($0.47/share) from $ 337.9 million ($0.40) a year ago, as the company begins to reap the results of its $27 billion merger with Caremark Rx in March. Revenue jumped 95% to $20.7 billion from $10.6 billion. Both numbers were slightly better than analysts who expected $0.46/share and revenue of $20.6 billion. CEO Tom Ryan: "This was an exceptionally strong quarter across our retail and pharmacy services segments... Gross margin improved significantly, operating margins expanded meaningfully, and... at the same time, we've completed the initial merger integration activities, made sizeable progress on our cost synergy opportunities, and significantly advanced our new go-to-market strategies." (See full earnings call transcript later.) CVS said merger and integration costs negatively impacted EPS by $0.01 and $0.02 for Q2 and H1 respectively. Said HSBC's Mark Husson: "The integration of CVS/Caremark is complete," adding, "There are some positive early indicators." CVS Caremark opened 37 new stores during the quarter, while closing 15. CVS has over 6,200 stores, to Walgreen's 5,800. It fills more than one billion prescriptions in the U.S. annually, vs. Walgreen's 529 million. Shares are up 3.4% to $35.54 in pre-market trading.
Sources: Press release, Dow Jones, Bloomberg
Commentary: CVS/Caremark Shares Down on FEP Mail-Order Loss • Cramer's Take on CVS • CVS/Caremark Comes Up Short Despite Record Earnings
Stocks/ETFs to watch: CVS. Competitors: ESRX, WAG, RAD, WMT. ETFs: RTH, VDC, PPH
Earnings call transcripts: CVS Q1 2007
Kodak Swings to a Q2 Profit on Growing Digital Strength
Eastman Kodak swung to a second-quarter profit of $592 million ($2.06/share), after losing $282 million (-$0.98) a year ago, boosted by lower costs and strong digital earnings. Net sales at the world's number-one photography company fell 6.6% to $2.51 billion from $ 2.69 billion in Q2 2006. Film products sales fell 15%, while digital imaging sales dropped 11%. The company reaffirmed its 2007 guidance: Earnings from continuing operations $150-250 million, digital revenue growth of 3-5%, and overall revenue decline of 4-7%. CEO Antonio Perez plans to return the company to ongoing profitability by 2008, and has spent $2.7 billion while cutting more than 23,000 workers in a major corporate restructuring effort. CEO Antonio M. Perez: "The performance of our business units this quarter is more evidence of the progress that we are making in positioning Kodak for sustainable success." (See full earnings call transcript later today.) This year the company introduced a new line of inkjet printers, and is working to improve picture quality on its digital cameras. "For 100 years they were a film company, and the leaders had to drag all the divisions into the digital age kicking and screaming," analyst Barry Ritholtz told Bloomberg. "That transition is finally nearing an end." Shares are up 16.2% over the past year.
Sources: Press release, Dow Jones, Bloomberg
Commentary: Kodak Moment: Free Cash Flow Potential Makes EK A Buy At Current Levels • Eastman Kodak's On The Road To Recovery • Kodak Jumps 8% on New Image Sensor Technology, Analyst Upgrades
Stocks/ETFs to watch: EK. Competitors: FUJI, CAJ, SNE
Earnings call transcript: Eastman Kodak Q1 2007
NYSE Euronext Beats By a Penny, But Losing Market Share to NASDAQ
NYSE Euronext reported its first quarterly earnings release as a combined entity. Net income surged 164% to $161 million, or $0.62/share as revenues jumped 63% $1.08b. Adjusted EPS totaled $0.65. Earnings were helped by a 28% increase in trades on Euronext's stock exchanges in Europe, which set a record at 74.8 million trades. Volume on the New York Stock Exchange also reached a new quarterly record, at 166.3 billion shares traded, but reports say the company's share of trading its own listed stocks declined 11.1% to 63.7%, as the NASDAQ continues to grab market share. NYSE Euronext shares are trading slightly higher to $77.10 in thin pre-market activity, after closing 0.05% lower to $76.98 on Wednesday.
Sources: Press release, MarketWatch
Commentary: Analysts Continue to Defend NYSE Euronext • How To Value NYSE Euronext • Cramer's Take on NYX
Stocks/ETFs to watch: NYX. Competitors: NDAQ. ETFs: FPX, IAI, VXF
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
It was another wild day on Wall Street, with a swing of over 250 points on the Dow -- 150 points of that swing was in the last half hour when a high double-digit loss became a triple-digit gain. Several buy programs hit the floor of the NYSE simultaneously and then bargain hunters jumped in to drive up both prices and volume.
But the early session was full of gloom and doom as rumors raged that Beazer Homes USA (BZH) would file for bankruptcy, which was later denied by BZH. Along with that, another Bear Stearns (BSC) problem surfaced, this time with an asset-backed fund.
An Institute for Supply Management [ISM] report showed that U.S. factory orders moderated in July for the first decline in four months, but a real surprise came when the National Association of Realtors reported that contract signings on existing homes climbed by 5% in June -- the biggest advance in three years -- and the market took off on heavy volume. This helped offset some of the panic created the day before when it was said that American Home Mortgage (AHM) might find it necessary to file for bankruptcy.
Time Warner (TWX) and Kraft (KFT) helped bring in buyers, too, when both exceeded forecasts. Following a 15-point decline, Citigroup (C) upgraded Apple Inc. (AAPL) to a buy from a hold, and AAPL rose $3.24 to $135.
At the close, the Dow Industrials were up 150 closing at 13,362. The S&P 500 gained 11 at 1,466, and the Nasdaq added eight points and closed at 2,554. Volume on the NYSE hit 2.4 billion shares while the Nasdaq traded 2.9 billion, but breadth on both exchanges was negative: New York 19/14 and Nasdaq 3/2.
Crude oil (September contracts) closed lower by $1.68 after climbing to as high as $78.70 a barrel. The Amex Energy SPDR (XLE) added 9 cents and closed at $69.14. Gold (December contracts) fell by $3.40 to $675.90, and the Philadelphia Gold/Silver Index [XAU] gave up $3.34 to close at $145.38.
What the Markets Are Saying
With volatility at the highest level in 4 1/2 years, it's becoming harder to anticipate the moves before they occur, so technicians find themselves reacting rather than predicting. But it is becoming clear that the move to new highs on the major averages on July 19 was a false breakout.
Yesterday's reactive bounce led by the blue chips (the Dow was up almost twice that of other indexes and the Nasdaq was up four times more), though accompanied by high volume this does not negate the breakdown through the June lows. This temporary flight to quality could, however, provide some quick profitable trades for the nimble as the Dow runs to the former support turned resistance at 13,685.
The last week and a half of selling sent the markets into a sharp oversold position, so yesterday's late rally turned the internal indicators positive. But a quick trade is all that can be expected before the Dow heads back down to April's breakout at 12,800, which is now the next support number. However, watch out for more bad news from the financial sector. As one fellow put it today, "Cockroaches don't come in pairs -- they come in hundreds."
Today's Trading Landscape
Today look for earnings from Advanced Medical Optics (EYE), Activision (ATVI), Allied Waste (AW), The Andersons (ANDE), Barnes Group (B), Brink's (BCO), Charter Communications (CHTR), Checkpoint (CHKP), Chesapeake Energy (CHK), Clorox (CLX), CMS Energy (CMS), Diana Shipping (DSX), Eastman Kodak (EK) (read above), El Paso Electric (EE), Expedia (EXPE), Gateway (GTW), GSI Technology (GSIT), HMS Holdings (HMSY), James River (JRVR), Newmont Mining (NEM), Noble International (NOBL), NYSE Euronext (NYX) (read above), PPL Corp. (PPL), TECO Energy (TE), Timberland (TBL), Viacom (VIA) (read above), Watson Pharma (WPI), Williams Co. (WMB) and many more.
Also look for June factory orders (the consensus expects 1.0%) and most importantly weekly jobless claims (the consensus expects cons 130,000). Nokia (NOK) topped earnings forecast and France Telecom (FTE) posted a 41% rise in first-half net as foreign companies continue to shine. But, again the focus will no doubt be on the financial services sector -- any new crises there could result in another sell-off.
Asian Headlines (via Bloomberg.com)
• Asia Stocks Rise on Astellas, Chi Mei Earnings; Taiwan Life, Mizuho Fall Asian stocks rose, recovering from earlier losses, after higher profits from Astellas Pharma Inc. and Chi Mei Optoelectronics Corp. helped counter concern the U.S. subprime loans crisis is spreading.
• Mattel Recalls 1.5 Million China-Made Toys That May Contain Excessive Lead Mattel Inc. (MAT), the world's largest toymaker, is recalling 1.5 million products around the world including Chinese-made Sesame Street and Dora the Explorer toys because they may contain ``excessive levels'' of lead.
• Lenovo's First-Quarter Profit Jumps 13-Fold on Job Cuts, Computer Orders Lenovo Group Ltd. (OTCPK:LNVGY), the world's third- biggest maker of personal computers, said fiscal first-quarter profit surged almost 13-fold, beating analysts' estimates, after the company eliminated jobs and gained orders.
European Headlines (via Bloomberg.com)
• European Central Bank Keeps Interest Rate Unchanged, May Signal Increase The European Central Bank left its benchmark interest rate at a six-year high of 4 percent today after eight increases since late 2005.
• Credit Suisse Profit Climbs 48 Percent on Trading, Private Banking Fees Credit Suisse Group (CS) posted the biggest profit gain among the world's top investment banks in the second quarter by boosting securities-trading income to a record and avoiding losses on subprime mortgage loans.
• Unilever Profit Tops Analyst Estimates; Shares Jump by Most in Seven Years Unilever (UL), the maker of more than 400 brands from Dove soap to Knorr soup, said second-quarter profit rose 16 percent and predicted faster revenue growth this year on price increases and ice-cream sales.
• Bank of England Keeps Interest Rate Steady at Highest Level in Six Years The Bank of England left its benchmark interest rate at a six-year high today as policy makers assess whether five quarter-point increases in the past year are enough to quell inflation.