Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 9:06 AM ET
S&P 500: -4.25 ;1,572.00
NASDAQ 100: -2.00; 2,192.25
Dow: -24; 14,213
NIKKEI 225: +0.10%; 17,177.89 (+17.99)
HANG SENG: +1.21%; 28,569.33 (+341.29)
SHANGHAI SE COMPOSITE: +0.97%; 5,771.46 (+55.57)
BSE SENSEX 30: +2.07%; 18,658.25 (+378.01)
FTSE 100: -0.11%; 6,608.40 (-7.00)
CAC 40: -0.37%; 5,840.53 (-21.40)
XETRA-DAX: +0.15%; 7,992.07 (+11.63)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.25%; $80.46 (+$0.20)
Gold: +0.93%; $750.00 (+$6.90)
Natural Gas: +1.09%; $6.94 (+$0.08)
Silver: +1.08%; $13.73 (+$0.147)
U.S. Breaking Newssee today's Wall Street Breakfast for earlier news
Monsanto Earnings In Line; Shares Dip on Weak Outlook
St. Louis agricultural biotech giant Monsanto said Wednesday its FQ4 loss widened to $210 million ($0.39/share) from $144 million ($0.27/share) last year, partially due to charges from its recent acquisition of Delta and Pine Land's cotton business. Its shares dropped 5.8% to $84.35 in pre-market trading after the company's 2008 EPS guidance fell short of expectations. Adjusted losses were $0.18/share, a penny worse than the $0.17 consensus analyst estimate. Sales climbed 13% to $1.57 billion from $1.39 billion, just short of $1.62 billion estimates, partially due to strong corn seed revenue in Brazil and Argentina. Monsanto said it forecasts full-year 2008 earnings of $2.20 to $2.40 a share, reflecting a growth rate of 10% to 20%. Analysts surveyed by Reuters had been projecting 2008 EPS of $2.50. In a Oct. 3 note, Jefferies & Co. told investors, "As a global leader in agriculture biotech, Monsanto provides investors a play on secular trends in favor of increasing farm productivity while curtailing consumption of energy, water, herbicides, and insecticides." The firm has a $100 target on the shares, and said a post-earnings dip would present a buying opportunity ahead of the firm's Nov. 8 investor day.
Sources: Press release, MarketWatch
Commentary: Monsanto Jumps on Exec Comments and Buy Rating
Stocks/ETFs to watch: MON. Competitors: DD, DOW, SYT, TOT. ETFs: IYM, VAW, PBJ
Valero Guides Lower for Third-Quarter
Valero shares dropped in pre-market trading Wednesday, after the company announced it expects third-quarter earnings to be lower than previously estimated because of record high crude prices cutting into margins. The company estimates earnings from continuing operations will fall between $1.30 and $1.40/share. Analysts surveyed by Thompson were looking for earnings of $1.91/share. Last year, earnings excluding items were $2.42/share. Valero estimates higher crude prices will decrease refining margins by $700 million from last year. The company also announced that it expects to report earnings from discontinued operations, related to its sale of a refinery in Peru, to be $0.75/share. Valero, which reports on November 6th, saw its shares fall 3.0% to $72.19 in pre-market trading Wednesday.
Sources: Press Release, Wall Street Journal, AP
Commentary: Gas Prices Up, Crude Down, Refinery Problems Cited • Valero Sells 165,000 bbl/Day Refinery To Husky For $1.9 Billion
Stocks/ETFs to watch: VLO. Competitors: BP, XOM, CVX. ETFs: IEO, RYE
Earnings call transcript: Valero Energy Corp. Q2 2007
Host Hotels & Resorts Gains On Strong Forecast
Largest U.S. REIT, Host Hotels & Resorts, rose nearly 4% in pre-market action (as of 8 a.m. ET) on a beat and raise earnings report (check back later for HST's latest earnings call transcript). Host's Q3 EPS more than doubled to $0.18 (net profit $97 million), up from EPS of just $0.07 a year ago. Revenue rose 8.6% to $1.21 billion; consensus analyst estimates were for EPS of $0.13 on revenue of $1.19 billion. Funds from operations [FFO], considered an important measure of a REIT's cash performance since it adds such items as amortization and depreciation back into net income, rose to 38 cents a share, from 28 cents a share a year earlier. Rate increases and higher occupancy sent revenue per available room [RevPar] up 7.2%. Host sees FY EPS of between $1.33-$1.37, FFO of $1.81-$1.85 including an $0.08 a share charge, and RevPar growth of 6.5%-7.5%. The FFO figure is up from the company's previous guidance of $1.78-$1.84; analysts were previously expecting FFO of $1.88 per share, excluding charges.
Sources: Press Release, Marketwatch, Reuters, AP
Commentary: Mark Hillman: Buys, Sells, Portfolio • Projected Dividend Growth, Shrinkage Rates of High Yielding S&P 500 Stocks
Stocks/ETFs to watch: HST. Competitors: MAR, HLT. ETFs: VNQ, ICF, RWR, FTY
Earnings call transcript: Host Hotels & Resorts Q2 2007
Philips To Book €500M Gain from LG.Philips Share Sale
Philips Electronics announced it has sold 46.4 million shares (13% stake) of LG.Philips LCD Co. for €1.55 billion ($2.2b), as part of its ongoing plan to divest overseas equity investments. Philips said it will book a €500M gain from the transaction in Q4. Philips plans to use the proceeds to increase its dividend payout and share repurchases, as well as for acquisitions in its core lighting, medical equipment and consumer electronics units. LG.Philips' shares have climbed by more than 60% in 2007 as LCD prices have recovered, following several quarters of falling prices, which resulted in net losses. In July, Philips said it would reduce its stake in LG.Philips to less than 20% during 2007, following the end of a lock-up on its 32.9% stake. In a statement, Philips said it "may decide to sell additional shares to the same financial institutions later today to meet additional demand, if any." Shares of Philips listed in Amsterdam were last up 1.7% to 31.96 in afternoon trading. Philips' ADRs were up 1.8% to $45.27 in thin pre-market trading, after gaining 2% to $44.97 on Tuesday. LG.Philips ADRs fell 5.5% to $24.96 on Tuesday and were down another 3.5% to $24.10 in thin pre-market activity. LG. Philips shares in Seoul closed 0.1% higher to 45,000 won.
Sources: Press release, Bloomberg
Commentary: Rising Panel Prices Bolster LG.Philips • Philips Electronics Hopes To Save Big With Reorganization • LCD Panel Makers, DRAM Producers Could Be Hit By Matsushita Plant Fire
Stocks/ETFs to watch: PHG, LPL. ETFs: EWN
Earnings call transcript: Koninklijke Philips Electronics Q2 2007, LG Philips LCD F3Q07
PetSmart Cuts Q3, FY Guidance on Economic Uncertainty
PetSmart cut its third-quarter and full year EPS guidance due to an "uncertain economic environment", impacted by recent consumer weakness and warmer-than-usual weather hurting sales of key cold-weather categories. PetSmart now expects Q3 EPS of $0.17 to $0.20, compared to $0.21 to $0.23 previously. Analysts were expecting EPS of $0.27. PetSmart also said it expects Q3 comparable store sales growth to come in below its original low-to-mid single digit forecast. For the year, PetSmart lowered its EPS forecast to $2.02 to $2.07, from $2.08 to $2.10 previously. Analysts were expecting $1.70/share, although this appears to exclude certain costs such as a $0.47 gain from the sale of shares of MMI Holdings. CEO Philip L. Francis acknowledged there are short-term operating challenges, but said the company feels "quite positive" about its long-term strength and still sees continued growth above its 20% target. Shares of PetSmart lost 0.6% to $32.38 on Tuesday and fell by 0.65% to $32.17 in thin after-hours trading.
Sources: Press release, Associated Press, MarketWatch
Commentary: PetSmart Continues To Deliver Despite Sector Turbulence • Pet Stocks: Nine Ways to Make Money From Caring for Your Pets • New Industry Trend: People Spending More On Their Pets
Stocks/ETFs to watch: PETM. ETFs: XRT
Earnings call transcript: PetSmart Q2 2007
Related: PetSmart Analyst Day Conference Webcast
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
There was a lot of good news from corporations yesterday with Yum Brands (YUM) reporting better-than-expected Q3 earnings, Mosaic (MOS) beating estimates, Lehman Brothers (LEH) raising the price target on Google (GOOG) to $714, and Alcoa (AA) climbing $1.42 in anticipation of its Q3 earnings report.
Most of that happened early and then until 2 p.m. the market was flat. Then the Fed released the minutes of last month's Federal Open Market Committee [FOMC] meeting, and stocks exploded, which drove the Dow Industrials and the S&P 500 to new closing highs.
After a first read, the minutes of the meeting seemed to say that any future rate cuts would depend on the economy and "evolving market developments" -- hardly a case for further cuts. But what impressed the market was that the Fed governors were unanimous in voting for the full 50-basis-point cut and there were just mild statements about inflation being a future risk. Instead they focused on a slower fourth-quarter GDP growth and also cut their forecast for growth in 2008, along with a forecast of slightly higher unemployment. No doubt there will be a more detailed analysis of the report, but the market's initial response was positive.
The Dow Industrials added 121 points to close at a new high of 14,165, the S&P 500 gained 13 at 1,565 (also a new high), and the Nasdaq rose by 17 and closed at 2,804. The NYSE traded 1.2 billion shares and the Nasdaq traded 1.9 billion. Breadth was a positive 2-to-1 on the New York Exchange and 4-to-3 positive on the Nasdaq.
Crude oil (November contract) ended higher by $1.24 at $80.26 a barrel, and the Amex Energy SPDR (XLE) gained $1.32 to close at $75.72. Gold (December contract) reversed course and closed higher by $4.60 at $737.40 per troy ounce. The Philadelphia Gold/Silver Index [XAU] jumped to a new high close, up $4.88, to $173.44.
What the Markets Are Saying
So far, the traditionally nasty month of October has rewarded investors with great performance. In just seven business days, the S&P 500 has risen 2.8% and the Nasdaq is up 3.8%.
Since this is the fifth anniversary of the bull market, here are some other statistics: In five years, the Dow Industrials have risen more than 94%, the S&P 500 is up over 101%, and the Nasdaq is up an astounding 151%. And most interesting: The P/E multiple of the stocks in the S&P is just about where it was five years ago.
As Q3 earnings reports now start in earnest, it is more important than ever that companies meet or exceed their estimates. In addition, it's important that big companies, like Alcoa (AA) who last night missed its estimates, continue to put cash to work by purchasing their shares. By doing so, they inflate their per-share earnings by reducing the number of shares on the market.
Today's Trading Landscape
The August wholesale inventories report is due at 10 a.m. (the consensus expects 0.3%). Third-quarter earnings are due from Audiovox (VOXX), Costco (COST), Host Hotels (HST) (read above), Infosys (INFY), Lam Research (LCRX), Lindsay Corp. (LNN), Monsanto (MON) (read above) and Ruby Tuesday (RT).
The minutes of the Fed's meeting are still getting a lot of attention this morning with some analysts concerned about the lack of guidance concerning a policy on interest rates and others voicing the fear that last month's cut was an overreaction. However, earnings are in focus today, and the impact of Alcoa's earnings miss could generate some selling. The futures are indicating a slightly lower opening.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Climb to a Record; Honda Motor, BHP Billiton, DBS Advance Asian stocks rose, led by Nintendo Co. (OTCPK:NTDOY) and BHP Billiton Ltd. (BHP), after the Federal Reserve eased concern the U.S., the region's biggest export market, is heading for a recession.
• Thailand Keeps Key Rate Unchanged for Second Time After Inflation Quickens Thailand's central bank kept its benchmark interest rate unchanged at a second meeting, following five cuts since January, citing concern inflation may accelerate as spending recovers a year after a military coup.
• Singapore's Economy Grew 6.4 Percent in Third Quarter, Beating Forecasts Singapore's economy grew more than forecast in the third quarter, extending the longest expansion since 1991, as factories increased output and financial services withstood a slump in global credit and equity markets.
European Headlines (via Bloomberg.com)
• European Bank Stocks Decline, Paced by HBOS, Royal Bank; Philips Advances European bank stocks fell, led by HBOS Plc and Bank of Ireland Plc (IRE), after Lehman Brothers Holdings Inc. said the companies will be hurt by slower growth in mortgage sales and increased funding costs.
• King Signals He's Reluctant to Cut Rate, Predicts Further Market `Turmoil' Bank of England Governor Mervyn King suggested he's reluctant to cut interest rates to shield lenders from increased credit costs and predicted more ``turmoil'' in financial markets.