Wall Street Breakfast: Must-Know News

• Wal-Mart beats. Wal-Mart's net income rose 17% to $3.5B, as sales grew 10% (see below). "We have improved customer traffic and ticket and overall sales growth in our markets," CEO Lee Scott said, but noted "inflation and higher fuel costs are pressuring suppliers, retailers and customers worldwide." Shares of Wal-Mart are up 22% YTD as a cash-strapped U.S. consumer turns increasingly to discount shopping.
• Barnes & Noble won't expand its Borders. Barnes & Noble (BKS) is not expected to make a bid for its bricks-and-mortar rival Borders, WSJ says. Some loaded up on Borders (BGP) in recent months in hopes of a bid. Borders put itself up for sale in March due to potential liquidity problems and a failed asset sale. B&N chairman Leonard Riggio said at the time it would be "the height of irresponsibility" not to consider a bid; it subsequently formed a team to assess the prospect. Its reluctance to follow through, WSJ says, stems from today's tight lending markets, and concern over BGP's lengthy lease commitments.
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• Euro-zone GDP shrinks for first time on record. Inflation, weak export demand, and faltering investments helped the Euro-zone economy contract in Q2 for the first time in almost a decade. Q2 GDP fell 0.2% from Q1 growth of 0.7% and annual GDP growth slowed to 1.5%. Inflation held steady at 4% in July, twice the ECB's 2% limit, but short of the 4.1% economist forecast. ECB President Trichet said growth will be "particularly weak" through Q3 as confidence in the European economy falls to an almost fifteen year low.
• Greenspan's response to GSE rescue: Bad. In an interview with WSJ, former Fed chairman Alan Greenspan condemns the government's response to the problems confronting mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE). Greenspan has warned for years that their business model threatened U.S. financial stability. He acknowledges that a backstop was unavoidable ("There's no credible argument for bailing out Bear Stearns and not the GSEs"), but thinks the government should have "wiped out" shareholders, nationalized the institutions and divided them up into smaller pieces. Greenspan now sees housing touching bottom in the first half of 2009.
• WSJ claims Boston Scientfic stent study was flawed. A WSJ review shows a heart stent manufactured by Boston Scientific (BSX) and expecting FDA approval for U.S. sales is backed by flawed research. Boston Scientific submitted the results of its 2006 clinical trial for Taxus Liberte to the FDA, but used a flawed statistical equation. By the common statistical standards for research, Liberte would have been a failure. Boston Scientific denies that the study failed or that the research is flawed. The Liberte stent is already one of the top-selling stents abroad.
• JPMorgan, Morgan Stanley near ARS settlement. Sources say JPMorgan (JPM) and Morgan Stanley (MS) are very close to settling with regulators to buy back billions of dollars worth of illiquid auction-rate securities they sold to investors. JPMorgan sold about $5B in ARS, of which $3B belongs to retail investors. Morgan Stanley said this week it was willing to repurchase $4.5B in ARS. Regulators accuse banks of misrepresenting ARS as liquid, cash-like instruments.
• Lehman looks to dish off dicey assets. Sources say Lehman (LEH), seeking to restore investor confidence, is in talks to sell $14B of its $40B commercial-real-estate portfolio to BlackRock (BLK). "They are taking steps to eliminate parts of the balance sheet that have caused concern," analyst Richard Bove said.
• Insider-trading crackdown. Ten exchanges agree to consolidate their insider-trading surveillance and investigation operations. NYSE and Finra will team up to monitor insider trading at all major exchanges, eliminating much of the existing overlap. NYSE's Richard Ketchum says an increasing number (45%) of suspected insider-trading violations involve hedge funds.
• Capital One may face severe writedown. Capital One (COF) fell 5.5% Wednesday after a Fox-Pitt Kelton analyst said it may have to write down a substantial portion of its $12.8B in balance-sheet goodwill. "This would wipe out a large portion of shareholders' equity and the profits generated during this decade," analyst Howard Shapiro said. "Although the charge would be non- cash, the destruction of value would be very real."
• Moody's downgrade socks GM. Shares of GM (GM) fell 7.5% after Moody's downgraded its debt to Junk (Caa1). The downgrade reflects the challenges GM faces in re-establishing a competitive position and generating positive cashflow amid softening U.S. vehicle sales, Moody's said.
• BHP mulling $25B bid for Implats? Rumors are growing that BHP Billiton (BHP) might make a bid of as much as $25B for Impala Platinum [Implats] (IMPUY.PK), the No. 2 global platinum producer. BHP is the world's largest metal/mineral producer, but has no platinum exposure.
• Retail Sales fell 0.1% in July from June, the Census Bureau said Tuesday, the weakest performance in five months. Economists had expected sales to be flat. Sales remain 2.6% higher than a year ago.
• Import Prices rose 1.7% in July, largely due to higher petroleum prices. Excluding fuels, import prices rose 0.9%. Exports were up 1.4%.
• China's industrial production slows to an 18-month low (+14.7% in July Y/Y) on weaker export demand and an Olympic Games curb on air-polluting factories.

Earnings: Thursday Before Open

• Elizabeth Arden (RDEN): FQ4 EPS of $0.22 in-line. Revenue of $236M (-2.6%) in-line. [PR]
• Estee Lauder (EL): FQ4 EPS of $0.61 beats by $0.05. Revenue of $2.01B (+14.2%) vs. $1.93B. [PR]
• J.M. Smucker (SJM): FQ1 EPS of $0.82 beats by $0.05. Revenue of $664M (+18.2%) vs. $647M. [PR]
• Urban Outfitters (URBN): Q2 EPS of $0.33 beats by $0.03. Revenue of $454M (+30.4%) vs. $450M. [PR]
• Wal-Mart (WMT): Q2 EPS of $0.86 beats by $0.02. Revenue of $102.7B (+10.4%) vs. $101.7B. Sees Q3 EPS of $0.73-0.76 vs. $0.76. [PR]

Earnings: Wednesday After Close

• Ctrip.com (CTRP): Q2 EPS of $0.25 beats by $0.05. Revenue of $55M (+30%) vs. $53.8M. Shares +1.85%. [PR]
• Intrepid Potash (IPI): Q2 EPS of $0.42 beats by $0.04. Revenue of $105M (+24.6%) vs. $96M. Shares -0.5%. [PR]
• NetApp (NTAP): FQ1 EPS of $0.22 in-line. Revenue of $869M (+26.1%) vs. $862M. Sees FQ2 EPS of $0.27-0.30 vs. $0.30. Initiates $1B share repurchase. Shares -6%. [PR]
• Virgin Mobile (VM): Q2 EPS of $0.07 beats by $0.05. Revenue of $317M (+2.5%) vs. $314M. Sees Q3 EPS of $0.00-0.03 vs. $0.08. Shares +9%. [PR]

• Today's Markets

• Asia closed mostly down on Thursday. Nikkei -0.51% to 12,957. Hang Seng +0.47% to 21,393. Shanghai -0.38% to 2,437. BSE -1.46% to 14,874.
• Europe is higher at midday. London +1%. Paris +1.1%. Frankfurt +0.4%.
• U.S. futures are trading to the upside. Dow +0.4%. S&P +0.4%. Nasdaq +0.3%. Crude +0.3% to $116.34. Gold +0.95% to $839.40.

Thursday's Economic Calendar

• 8:30 Consumer Price Index
  8:30 Jobless Claims
  10:35 EIA Natural Gas
  4:30 PM Money Supply
• Notable earnings before Thursday's open: CCJ, EL, MPEL, URBN, WMT
• Notable earnings after Thursday's close: A, ADSK, DV, JWN, KSS

Seeking Alpha editor Rachael Granby contributed to this post.

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Comments

[Mazel Tov:]

Somebody needs to shut Greenspan up!

2008 Aug 14 08:34 AM

[notsosmart:]

in this country no one has to "shut up".not yet anyway.what people have to learn is not to listen.think for yourself.this could be hard for the more & more dumb-dumber americans.well-it was great while it lasted.

2008 Aug 14 09:51 AM

[wallyjm:]

boo-ya to all you morons!

2008 Aug 14 12:13 PM

[pickaroonwyo:]

Nobody in this country has to shut up.......except for Barney Frank. Two wraps of duct tape oughta do it.

2008 Aug 14 01:16 PM

[ertsfan:]

I'm tired of Greenspan, too. Hasn't he caused enough problems?

2008 Aug 14 03:34 PM