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  • TI dips on weak guidance. Texas Instruments (NASDAQ:TXN) reported in line Q1 EPS of $0.43 on revenue of $3.27B (+2.5%, in-line). TI's Q2 revenue forecast ($3.24-3.5B) fell short of analyst estimates ($3.44B). Anticipated Q2 EPS is even weaker: $0.42-0.48 vs. $0.51 consensus. "Given uncertainty in the near-term economy, we have become more conservative with our outlook for the second quarter," CEO Rich Templeton said. In that light, and given that shares gained 3.3% in regular trading Monday, a 2.5% drop in extended trading is hardly a selloff -- perhaps a testimony to TI's long-term growth potential.
  • Citi turns to HP; selling $6B in hybrids. In a novel move to defend its controversial business model, Citigroup (NYSE:C) is asking Hewlett-Packard (NYSE:HPQ) for advice on both IT issues and general strategy. Sources say Citi execs want to know how HP managed to overcome investor pressure to spin off its computer business, similar to the present calls for Citi to split its wholesale and retail banking units. Meanwhile, Citi is bolstering its balance sheet by selling $6B of hybrid bonds at 8.4% for 10 years, after it posted writedowns of almost $16B last week. Hybrid bonds allow banks to bring on cash with deferred interest payments, while the bulk of the offering is considered equity by credit-raters. "It's a way of not upsetting the apple cart," portfolio manager Bill Larkin said. "They don't want to dilute shares, and they don't want to issue more debt."
  • RBS: Big writedown, big share sale. Royal Bank of Scotland (NYSE:RBS), #2 UK lender, is selling £12B ($23.7B) in shares to reinforce its capital. It announced £5.9B in asset markdowns, and said it will cut its 2008 dividend. RBS said its 2008 outlook is still "inevitably clouded" by U.S. subprime fallout, not to mention its $22.7B spend on ABN Amro, which now seems impossibly expensive. RBS has lost almost half its market value; shares were down 5% in London. "I can well understand this is not easy for shareholders. It is not easy for me," CEO Fred Goodwin said. He told journalists he would consider selling the firm's insurance unit, but not ats "fire sale" prices.
  • Netflix plunges on weak outlook. Netflix (NASDAQ:NFLX) posted in-line EPS and revenue of $0.21 and $326M. For Q2, it sees EPS of $0.33-0.42 (consensus: $0.39). Netflix lowered its full-year guidance to $1.16-1.29 from $1.18-1.30 (consensus: $1.25). On its conference call, NFLX said that the numbers assume its market continues to grow. Investors were spooked: shares fell 13.5% in AH trading. Gross margin (31.7%) was down 2.1% sequentially and 4.4% from a year ago. Churn rate dropped to 3.9% from 4.4%. Netflix shares were up almost 50% YTD on reduced competition from Blockbuster (BBI), which turned its focus back to in-store rentals, and is now bidding for brick-and-mortar retailer Circuit City (CC). The wildcard is how emerging online video offerings from Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) will affect its sales.
  • CIT to squeeze $1B from stock sale. Commercial lender CIT Group (NYSE:CIT) will raise $1B in a stock offering, as it tries to escape a liquidity crisis. It will use the proceeds for general corporate purposes; to pay a dividend; and to meet debt payments. Unfortunately, CIT already cut its dividend by 60%. It also sold $5B in assets and drew down $7.3B of its emergency credit lines. Shares fell 13.7% in AH trading.
  • Intrepid Potash's intrepid IPO. Fertilizer producer Intrepid Potash (NYSE:IPI) priced its 30M share IPO at $32 ($960M) -- $3 better than the top range of the $27-29/share forecast (which was originally 24M shares at $24-26). Underwriters including Goldman Sachs (NYSE:GS), Merrill (MER), Morgan Stanley (NYSE:MS) can purchase another 4.5M shares. Intrepid accounts for about 1.5% of global potash production. Some have compared its IPO to that of Google (NASDAQ:GOOG) and Visa (NYSE:V).
  • CME beats on large volume jump. CME Group's (NASDAQ:CME) Q1 EPS of $4.67 were just short of analyst estimates ($4.80). Revenue of $625M (+25.5% adjusted for CBOT acquisition) was in line. Volume grew a robust 32% during the quarter amid broad strength. "This performance illustrates the benefits of the exchange model for managing risks in diverse global markets," CEO Terry Duffy said.
  • DuPont beats; guides in line. DuPont (NYSE:DD) reported Q1 EPS of $1.31, $0.05 better than consensus. Revenue of $8.57B (+9.3%) was in line. For Q2, DuPont sees EPS of $1.05 (consensus: $1.08). For 2008, sees EPS of $3.40-3.55 (consensus: $3.48). "Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets," CEO Charles Holiday said.
  • Baker Hughes beats by penny. Oilfield servicer Baker Hughes's (NYSE:BHI) Q1 EPS of $1.21 was slightly better than analyst estimates ($1.20). Revenue of $2.67B (+8%) was in line. "Results from North America were better than expected," CEO Chad Deaton said. "Improving fundamentals for natural gas reflected in lower storage levels, higher natural gas prices, increased oil-directed drilling, and announcements by E&P operators of spending increases support higher drilling activity and additional opportunities for Baker Hughes in North America in the second half of 2008." Oil-services provider Smith International (SII) posted in-line EPS of $0.87 on in-line revenue of $2.37B (+12.5%).
  • Slick quarter for EnCana. EnCana (NYSE:ECA) beat Q1 EPS estimates of $1.28 by $0.11. Revenue of $5.34B (+20.4%) were better than $4.9B consensus. Free cash flow rose to $540M from $271M.
  • AU Optronics shines. Liquid panel developer AU Optronics (NYSE:AUO) smashed Q1 EPS estimates: $1.12/share vs. $0.48 consensus. Revenue of $4.5B (+85%) was better than consensus estimates of $4.24B. For Q2, AUO expects PC LCD shipments to fare better than TV panels. The firm said it will build a new factory. "In my crystal ball, I'd say visibility of the LCD industry is clear because it's a growing market," Taiwan asset manager Kevin Yang said. "TV is a very promising sector and the pie is getting bigger and bigger."
  • UnitedHealth drops outlook. UnitedHealth Group (NYSE:UNH) posted Q1 EPS of $0.78, $0.02 short of consensus estimates. Revenue of $20.3B (+6.6%) beat consensus of $19.88B. UNH lowered its full-year guidance to $3.55-3.60 from $3.95-4.00 (consensus: $3.87). "These financial results are not acceptable for a company with our capabilities and potential. They are due in part to broader economic challenges and in part to our own performance. We are adjusting our approaches, in particular to strengthen organic growth and address operating costs, to deliver financial performance that more appropriately represents the capacity and potential of our organization," CEO Stephen Hemsley said. Shareholders are unlikely to be appeased.
  • SunTrust sees cloudy future. SunTrust Banks' (NYSE:STI) Q1 EPS of $0.81 were $0.21 short of analyst estimates. Revenue of $2.3B (+22.9%) beat consensus of $2.13B. SunTrust increased its loan-loss provision to $560M (1.25%) due to the deterioration of residential real-estate markets. "The backdrop of emerging recession fears clouds the near-term outlook," CEO James Wells said, adding, "SunTrust is financially strong, with ample liquidity, adequate capital, and a solid balance sheet."
  • Cash infusion socks NatCity. National City (NCC) agreed to sell a $7B stake to a private-equity group led by Corsair Capital at a 40% discount, sending shares plummeting 28% to $6.03. Shares are down 84% over the past 12 months. KBW analyst Melissa Roberts thinks banks will still seek to raise another $12.4B, adding to the $163B they've already sought since July (not sure if she's including Citi's $6B hybrid offering). "There's an appetite out there for risk, but at a price," RBC analyst Jason Arnold said.
  • Oil price keeps gushing. Oil posted new highs of $117+ a barrel amid a falling dollar and attacks on Nigerian pipelines owned by Royal Dutch Shell (NYSE:RDS.A). "We are clearly headed over $120 a barrel and we are targeting $125," said MF Global's John Kilduff. "The last thing we need is another supply disruption. The outage certainly adds to the bullish sentiment."
  • Lexmark beats; guidance midpoint is low. Lexmark (NYSE:LXK) posted Q1 EPS of $1.16, $0.26 better than the consensus. Revenue of $1.18B (-6.8%) was in line. For Q2, Lexmark sees EPS of $0.65-0.75 vs. $0.73 consensus.
  • WSJ loses managing editor. WSJ managing editor Marcus Brauchli is expected to resign as early as today after just 11 months; publisher Robert Thompson may take over for now. The separation is said to be "amicable" and Brauchli is expected to stay on with WSJ parent News Corp. (NASDAQ:NWS). Sources say that Brauchli tried (unsuccessfully?) to find a middle-road between the Journal's traditionalists and Rupert Murdoch's new vision for the paper. Separately, sources say Murdoch has all but sealed a deal to buy Tribune's Newsday (excluding its real-estate) for about $580M. Murdoch is thought to see Newsday as the solution to the New York Post's lack of profitability.

EARNINGS UPDATE

  • AT&T (NYSE:T) posted in-line EPS and revenue of $0.74 and $30.74B. Wireless subscribers were up 1.3M (8.7%) vs. a year ago on strong iPhone (AAPL) sales. "What we're hearing is that ever since AT&T and Apple cut the price, every single week they've been taking market share from Verizon," Stifel Nicolaus' Christopher King says. Broadband revenue grew 13.2% to 14.6M. U-verse TV subscribers were up 148,000 to 379,000 -- on track to reach target AT&T's year-end target of 1M+.
  • Western Union's (NYSE:WU) EPS of $0.29 beat estimates by a penny. Revenue of $1.3B was in line. WU sees 2008 EPS of $1.25-1.29 vs. consensus of $1.27, and 2008 revenue growth of 9-11%.
  • Lockheed Martin (NYSE:LMT) beat by $0.12 with EPS of $1.75. Revenue of $9.98B (+7.3%) beat estimates of $9.69B. For 2008, LMT sees EPS of $7.15-7.35 (consensus: $7.37) and revenue of $41.8-42.8B (consensus: $42.8B).
  • Kimberly-Clark (NYSE:KMB) reported EPS of $1.08, $0.01 ahead of consensus. Revenue of $4.81B was in line. For Q2, KMB sees EPS of $1.08-1.11 (consensus: $1.12). For 2008, it sees $4.45-4.60 (consensus: $4.54).
  • McDonald's (NYSE:MCD) reported Q1 EPS of $0.81, beating estimates by $0.11. Revenue of $5.61B (+6.1%) also exceeded estimates of $5.4B. Global same-store sales gained 7.4% (consensus: 6.4%).
  • UAL (UAUA) lost $4.45/share, $1.04 more than analysts expected. Revenue of $5.15B (+15.4%) surprised to the upside (consensus: $4.75B). UAL will reduce its 2008 non-fuel costs by $200M, and its capex by the same amount, and cut 1,100 jobs. It will retire 30 planes, 10-15 more than previously expected.
  • JetBlue Airways (NASDAQ:JBLU) lost $0.04/share, better than the $0.07 loss analysts forecast. Revenue of $816M (+34.2%) was better than the $786M consensus. JBLU says it will now allow customers one free bag check; the second will cost $20.
  • Wyeth (WYE) reported Q1 EPS of $0.94, $0.04 better than the consensus. Revenue of $5.71B (+6.4%) also outdid expectations of $5.5B. For 2008, WYE sees EPS of $3.35-3.49 (consensus: $3.42).

Today's Markets

  • Markets in Asia were mixed Tuesday. Nikkei -1.09% to 13,548. Hang Seng +0.88% to 24,939. Shanghai +0.99% to 3,148. BSE Sensex +0.27% to 16,784.
  • In Europe, markets are essentially flat at midday. FTSE flat at 6,053. CAC +0.22% to 4,921. DAX +0.13% to 6,794.
  • U.S. futures are also flat at 7:15 AM.

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