- Costco beats. Quarterly earnings at Costco (COST) rose by 32% to $295M. Revenue rose 13% to $16.6B. EPS of $0.67 were $0.02 better than analyst estimates. Same-store sales gained 8% - +6% domestically and +16% internationally. Membership fees brought in $351M, net of which the company would have lost money on the quarter.
- Sears shocks. Sears (SHLD) reported a $0.53/share loss, surprising analysts who were expecting EPS of $0.15. Sears said ominously it does not foresee "any significant near-term improvement in the overall retail environment" due to high gas and food prices, among other factors. Revenue fell 6% to $11.1B. Gross margin fell to 27.3% from 28.2%.
- Yang says Microsoft not buying Yahoo. "Microsoft (MSFT) is no longer interested in buying the company, and we are talking about other things. We definitely have to understand what they're proposing... they clearly have an interest in Yahoo (YHOO), and we need to understand more." - Yahoo CEO Jerry Yang. On a possible Google (GOOG) search-ad JV: "It makes a lot of sense, but if we do something, we will talk about it." Yesterday, Business Week cited inside sources that Microsoft was still very interested in buying Yahoo outright, that it was closer to a buy than any time since its initial bid, and that Yahoo could be had for a drop more than MSFT's original $31/share offer.
- UAL, US Air talk merger. Sources say the CEOs of UAL (UAUA) and US Airways Group (LCC) will meet today to discuss a potential merger. UAL's merger plans with Continental (CAL) were abruptly canned by the latter last month. A merger could deliver $1.5B+ in synergies (more than their combined market cap!). Issues include funding and how to appease pilots fighting for seniority. The clock is ticking: both agree antitrust approval will be easier now under the Bush administration.
- Where's the oil going? Global oil exports shrunk by 2.5% in 2007, despite 57%-higher prices -- seemingly defying logic. Contributing factors include an increase in demand within oil-producing Gulf nations; sluggish investments in Mexico, Norway and Russia; and OPEC cutbacks. Analysts say there may be hope on the horizon: Russia will likely reverse taxes that disincentivize development, and 65 new ultra-deepwater drilling rigs come online over the next three years which should help companies access promising digs in Brazil, Australia and the GoM.
- Grains outlook gets pricier. The Organization for Economic Cooperation upwards-revised its decade-out forecast for wheat and corn prices by as much as 26%. It now expects wheat to cost $231.60 a metric ton in 2016-2017 and corn to cost $166.60 a ton -- up from $183.20 and $138.20 in last year's report. "Changing diets, urbanization, economic growth and expanding populations are driving food and feed demand in developing countries," it said. "While smaller than the increase in food and feed use, biofuel demand is the largest source of new demand in decades."
- Infineon plunges on weak outlook. Number-two European chipmaker Infineon (IFX) fell as much as 10% in Frankfurt after it increased its Q3 loss estimate due to weak orders and a delay in a key Nokia (NOK) deal. It now sees a loss of €40M, vs. a previous forecast of -€25M. CEO Wolfgang Ziebart resigned earlier this week over strategic differences with his board. "This has been a week of quite negative newsflow, and I'm sure investors will be unhappy," JPMorgan's Sandeep Deshpande said. "They should have published today's announcement with the Ziebart departure."
- WSJ continues to undress the Libor. It says C, JPM and UBS have been reporting "significantly lower" borrowing costs than suggested by default-insurance rates -- markets which have previously moved in tandem. According to WSJ's number crunching, Libor understatements represent a $45B interest-payment break for borrowers over the first third of this year -- good for them but horrendous for lenders and funds that invest in Libor-based derivatives.
- BofA ousts Countrywide COO. Bank of America (BAC) backtracked on its promise to keep Countrywide (CFC) COO and president David Sambol on board after it takes over. Sambol has been the subject of extensive criticism over Countrywide's aggressive mortgage sales. Baird analyst David George noted the departure could make the CFC integration "somewhat more difficult." It does, however, dispel any lingering doubts over BofA's intention to follow through with the buy.
- Dow struggles to keep up with energy costs. Dow Chemical (DOW) hiked its prices by 20% across the board, citing high costs for raw materials, energy and transport. "For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy," CEO Andrew Liveris said.
Earnings: Wednesday After Close
- Coldwater Creek (CWTR): Q1 EPS of -$0.10 beats consensus of -$0.16. Revenue of $271M vs. consensus of $246M. Sees full-year EPS of -$0.13 to -$0.04, better than consensus of -$0.14.
- Dress Barn (DBRN): FQ3 EPS of $0.39 beats consensus of $0.29. Revenue of $353M vs. consensus of $351M.
- Jo Ann Stores (JAS): Q1 EPS of $0.12 beats consensus of $0.01. Revenue of $446M in-line. Same-store sales increased 4.5%, vs. a 1.8% increase a year ago. Sees full-year EPS of $0.75-0.85, short of consensus of $0.87.
- Men's Wearhouse (MW): Q1 EPS of $0.20 misses consensus of $0.22. Revenue of $491M vs. consensus of $477M. Sees Q2 EPS of $0.75-0.79, short of consensus of $0.82.
- TiVo (TIVO): Q1 EPS of $0.04 beats consensus of -$0.01. Revenue of $54.9M vs. consensus of $55.6M. Sees Q2 revenue of $53-55M vs. consensus of $56.7M.
Earnings: Thursday Before Open
- Big Lots (BIG): Q1 EPS of $0.42 beats consensus of $0.36. Revenue of $1.15B in-line. Sees full-year EPS of $1.80-1.90, better than consensus of $1.78.
- Costco (COST): FQ3 EPS of $0.67 beats consensus of $0.65. Revenue of $16.61B vs. consensus of $16.32B. Comps grew 8%.
- Fred's Inc (FRED): Q1 EPS of $0.18 beats consensus of $0.16. Revenue of $464M vs. consensus of $457M. Sees Q2 sales up 1-3% and comps up 2-4%. Sees full-year EPS of $0.52-0.58, short of consensus of EPS of $0.68.
- Joy Global (JOYG): FQ2 EPS of $0.66 misses consensus of $0.74. Revenue of $843M vs. consensus of $798M. Sees full-year EPS of $3.15-3.30, short of consensus of $3.28, and revenue of $3.3-3.4B vs. consensus of $3.23B.
- Heinz (HNZ): FQ4 EPS of $0.61 in-line. Revenue of $2.69B in-line. Sees 2009 EPS up 8-11% to $2.83-$2.91, in-line.
- Royal Bank (RY): FQ2 EPS of C$0.70 misses consensus of C$0.99. Q2 loan loss provisions of C$349M. "We believe a significant portion of the writedowns reflects liquidity pressures on assets that we continue to hold, rather than underlying credit quality."
- Sears (SHLD): Q1 EPS of -$0.53 misses consensus of $0.15 (!). Revenue of $11.07B (-5.8%) vs. consensus of $11.41B. Announces $500M buyback.
- Asia Thursday: Nikkei +3.03% to 14,124. Hang Seng +0.55% to 24,384. Shanghai -1.66% to 3,401. BSE Sensex +0.25% to 16,567.
- Europe at midday: FTSE +0.68%. CAC +0.24%. DAX +0.30%.
- U.S. futures at 7:15 AM: Dow -0.06%. S&P -0.04%. Nasdaq -0.04%. Oil -0.85% to $129.88. Gold -0.88% to $892.60.
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