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Prices paid by American consumers rose more than expected in March, posing a dilemma for Federal Reserve policy makers who signaled yesterday they may soon stop raising interest rates.
Intel (INTC), the world's biggest computer-chip maker, said profit sank 38 percent, the biggest decline in more than four years as the company lost market share to Advanced Micro Devices.
Apple Computer Inc. (AAPL) said profit rose 41 percent, buoyed by rising sales of iPod music players and Macintosh personal computers.
EBay (EBAY), the world's largest online auctioneer, said first-quarter earnings fell 3.1 percent on stock option expenses. The company's profit and sales forecasts for this year fell short of analyst estimates, driving the shares down as much as 7.4 percent.
JPMorgan Chase & Co. (JPM) profit rose to a record $3.08 Billion, buoyed by the highest investment-banking fees since 2000 and lower credit-card defaults.
Pfizer (PFE) , the world's biggest drug maker, profits climbed to $4.1 billion on pain, arthritis, cholesterol drugs.
Coca-Cola (KO), the world's largest soft-drink maker, said first-quarter profit rose 10 percent, bolstered by gains in Asia and Latin America. Sales were unchanged.
United Technologies, maker of Pratt & Whitney jet engines and Sikorsky helicopters, said profit rose 18 percent on sales of spare aircraft parts. The company raised its 2006 profit forecast.
Higher gasoline prices lifted a key inflation measure in March, but stripped of food and energy, the report showed more upward pressure on prices than expected by Wall Street. The report could be a warning sign that higher energy prices are starting to bleed over into the prices of other products. Inflation gets particular attention from investors for clues as to what it means for the future of interest rate hikes.
Toyota is planning to sell ethanol-powered vehicles in the US by 2008 in the latest push by the Japanese carmaker into segments dominated by the Detroit-based manufacturers. It will start selling a flexible-fuel vehicle, which can run on up to 85% ethanol or ordinary petrol, after a surge of interest in ethanol, a fuel made from plants such as corn or sugar cane.
Coca-Cola, the world's biggest soft-drink maker, reported a 10 percent rise in profit, helped partly by higher pricing, but sales were flat despite increased innovation. The company posted a 5 percent rise in unit case volume led by continued strong growth in key emerging markets, including China, Russia, Brazil and Turkey. Carbonated beverages posted a 3 percent gain, noncarbonated beverages saw nearly four times as much growth at 11 percent.
China and the U.S. . . . On the eve of Chinese President Hu Jintao’s meeting with U.S. President Bush, China’s most recent data shows a fast-growing economy still driven primarily by domestic investment and exports. First-quarter GDP growth, plus data on March trade, credit growth and foreign exchange reserves, were all strong.
• Despite stepped-up policy stimulus, private consumption growth has actually slightly moderated from the fourth quarter, however, as savings have risen. This risks sustaining the general problem of weak local corporate profitability into the medium term.
• The investment-heavy composition of growth – which has created ample capacity, reducing the need for imports -- has meant that China’s large trade surpluses have not significantly declined, despite world-beating overall GDP growth. Indeed, there also is arguably a capacity-driven element to China’s still-strong export expansion as well. In this way, China’s domestic growth imbalances have widened its external trade surplus.
• The above issues could sustain protectionist frictions well beyond this week’s summit between Presidents Bush and Hu. They also raise the prospect for renewed Chinese monetary tightening around mid-year.
• On the more positive side, we remain convinced that neither U.S. nor Chinese authorities will allow protectionist forces to prevail in respective domestic political debates. And China’s new capital account liberalizations will create competitive pressures for higher domestic investment returns -- and thus, should help boost private consumption over time. The obstacles to China revaluing the yuan remain large, and don’t expect much change beyond the capital account liberalizations.
Eco Speak . . . Consumer price index rose 0.4% in March. Prices were higher across the board, with only natural gas, new vehicles and education prices declining in the month. The increase was above Wall Street's expectations of a 0.3% gain. The core CPI, meanwhile, increased 0.3%, a tick higher than the 0.2% gain expected. This is the largest increase in core prices since last March. The CPI has risen 3.4% in the past 12 months, down from 3.6% last month. The core rate is up 2.1% year-over-year, the same as last month. In March, energy prices rose 1.3%. Food prices rose 0.1%. Housing prices increased 0.2%.
Story of the Day . . . Jim Rogers, the former George Soros partner who foresaw the start of a commodity rally in 1999, said the boom in energy and raw material prices will endure, driving gold to a record $1,000 an ounce. ``The shortest bull market for commodities lasted 15 years, the longest 23 years,'' Rogers said. Prices of crude oil, copper and zinc are at records, and other commodities are at multiyear highs, as speculators and hedge funds seek investments delivering greater returns than stocks and bonds. Global demand led by China, the world's fastest growing major economy, has outstripped supply curtailed by lack of investment and output disruptions. China, home to 1.3 billion people, is the world's biggest consumer of steel, copper and zinc and the second-largest user of energy. Agricultural commodities may offer new investment opportunities. ``That's where prices have moved least.'' Cotton prices are more than 50 percent below their all-time high; soybeans are 60 percent below their peak and sugar 80 percent, Rogers said. [Bloomberg.com]
Egregious Pay . . . UnitedHealth Group CEO has recommended that the big health insurer suspend many forms of its senior executive pay, including stock options, in what compensation experts called an unprecedented move. Weird thing is that this comes after he obtained $1.6 billion in stock options.
Financials . . . J.P. Morgan Chase reported income of $3.1 billion up 35% from $2.3 billion in the year-ago period. The bank said revenue totaled $15.2 billion up from $13.7 billion. CEO Jamie Dimon cited "positive momentum across the firm."
Wachovia upgraded Allstate to Outperform. The firm notes that the stock is down 11% since Hurricane Katrina vs the 9% rise in the S&P 500. Firm says earnings growth prospects are favorable, and the negative headline risk related to Katrina litigation was reduced by last week's favorable ruling in Mississippi, where a federal judge decided that ALL's flood exclusions are "valid and enforceable."
Friedman Billings upgraded Annaly Mortgage to Outperform and raised their price target to $14.
Janney upgrades Community Banks to Buy. Price target is $29. The upgrade is based on quarterly results and believe solid earnings are likely to continue primarily due to strong commercial loan growth and increases in fee income.
Oppenheimer initiates TradeStation Group with a Buy and $17.50 target. They view the technology platform as best-in-class for active retail and certain institutional accounts, and believe the co can leverage its differentiated platform for continued growth in client assets and execution volume across a growing set of asset classes.
RBC raises their target on Wells Fargo to $73. The firm is saying that core fundamental trends remain favorable even after 1st quarter earnings feel short of firms expectations.
Wachovia upgraded Allstate to outperform. The firm is saying Allstate has made progress reducing its catastrophe exposure going into a potentially active hurricane season.
Energy . . . The American Petroleum Institute said crude inventories fell 4 million barrels for the week ended April 14, higher than the Energy Department's reported 800,000-barrel decline. Motor gasoline inventories were down 3.3 million barrels. Distillate stocks fell 2.8 million barrels.
Barron's Online reports the decline in natural gas prices presents an investing opportunity in Kerr-McGee. Kerr-McGee shares, up more than 40% in the last 12 months, still look cheap at under 12 times 2006 earnings. Profits are projected to jump 29% in 2007.
The Wall Street Journal reports Apache will buy all of BP PLC's remaining oil and natural-gas fields on the Gulf of Mexico's continental shelf for $1.3 billion.
SunPower announces installation of its A-300 solar cells in a unique Building Integrated Photovoltaic facade of the Millennium Towers high rise in Battery Park City, located in lower Manhattan.
Transports . . . American Airlines said it lost $92 million in the first quarter. The net loss was narrower than the $162 million a year ago. Revenue totaled $5.34 billion up 13% from $4.75 billion last year. Fuel spending rose 34% to $1.47 billion, the company said. AMR's CEO Gerard Arpey said in a statement he expects "a very robust summer" for the world's biggest airline.
Wachovia initiates Knight Transportation with an Outperform. They believe shares warrant a meaningful premium to the firm's truckload index due to their ability to grow both revenues and net income despite economic and industry conditions.
The 24% run-up in crude oil prices since Feb. 15 means if you are going to fly this summer you better book now as there will be fewer seats in the lowest-price categories, big increases in business fares and somewhat smaller increases in leisure fares.
Toyota is planning to sell ethanol-powered vehicles in the US by 2008 in the latest push by the Japanese carmaker into segments dominated by the Detroit-based manufacturers.
Leisure . . . Brean Murray raises their target on Penn National Gaming to $49. The firm is increasing its estimates and strong trends at virtually all the company's properties and the firms more favorable outlook for the company's casino in Maine.
The Wall Street Journal reports Aztar is close to striking an agreement to be acquired by Pinnacle Entertainment for about $1.5 billion
Media . . . Google is introducing a tool designed to make it easier for companies and their workers to find vital information scattered across a maze of complex software applications.
Apple Insider reported that some companies are illegally manufacturing digital music players that look very similar to its various Apple iPod models in an attempt to pawn them off to unsuspecting buyers.
Take Two announced it will push back the console release of GTA: Liberty City Stories until June. This announcement follows statements during the company's 1st quarter earnings conference call that indicated a late April, 2nd quarter release. Publishers are all facing the challenges of the console transition, and continue to believe GTA is a durable and profitable brand. Yet, repeated product delays reinforce our concerns that TTWO needs to show dramatic and consistent improvement in execution, a process bound only to get more complex as the next-gen cycle progresses.
Engadget stumbled upon a TiVo partnership with Blockbuster Online. From the look of things, you'll be able to lock yourselves into a 1 year Blockbuster Online commitment for between $13-$15 per month over the cost of TiVo's current hardware / service bundles.
News Corp. is buying a stake in online job search engine SimplyHired.com and venture capitalists are investing $25 million in college networking Web site Facebook.com.
Yahoo! repurchased a fairly large number of shares, improved fundamentals, and promised additional details regarding search monetization improvements at its upcoming analyst day.
Bear Stearns says Yahoos! growth rates are not as robust as they once were which reflects a larger revenue base and a more competitive market. Yahoo continues to offer one of the best growth profiles in media which could possibly accelerate with improvements in monetization.
UBS raised the price target for Yahoo! to $42. The firm is saying in the face of significant investor skepticism, YHOO produced a qtr that was solid across the board.
Healthcare . . . Genzyme reported earnings of $101 million up from a year-ago profit of $95.6 million. The company said the latest results include stock option expensing of $22.3 million. Revenue rose 16% in the latest three months to $730.8 million from $629.9 million in the same period a year earlier. Genzyme also reiterated its outlook for the full year.
Lehman Brothers upgraded Barr Labs to overweight. The firm is citing recent stock weakness and expected near-term catalysts. Among the catalysts, the broker cited a likely stronger-than-expected March earnings report. Lehman added that with Barr's series of corporate deals late last year, its fundamental outlook improved considerably.
St Jude’s announced new $700 million buyback to replace earlier $300 million buyback
Pfizer reported earnings of $0.61 per share ex items, $0.08 better than the consensus of $0.53. Revenues fell 3.3% year/year to $12.66 billion versus the $13.03 billion consensus. The company reaffirmed 20Y06 EPS guidance of $2.00 vs. $2.01 consensus and continues to expect 2006 revenues to be comparable to those in 2005.
CIBC upgraded Manor Care to Sector Outperformer. Price target is $50. They believe higher-acuity patient codes in the Medicare RUG reimbursement structure can have a more beneficial impact on pricing in 2006, particularly for companies like HCR that focus on medically complex cases, than originally expected.
St. Jude Medical reported earnings of $137 million up from $119 million in the year-earlier period. Revenue rose 18% to $784.4 million from last year's $663.9 million. Separately, the company launched a $700 million stock buyback program.
Retail . . . ThinkEquity upgrades Cheesecake Factory to Buy and raised their target to $40. The upgrade is based on their view that lackluster comps projections and other cost issues are priced into the stock.
RadioShack target cut to $18 f at FTN Midwest.
Michaels Stores downgraded to Strong Sell at Matrix.
Telecom . . . Cingular Wireless, the nation's biggest wireless-phone company, added 1.7 million net customers in the first quarter as the carrier held on to more of its subscribers. Net income totaled $354 million, compared with a loss of $240 million a year earlier. Revenue rose 9% to $9 billion. Cingular ended the quarter with 55.8 million users. Monthly churn, or the number of customers who drop service, fell to a record low 1.9%. Average revenue per user fell 2.3% to $48.48, reflecting a bigger increase in wholesale customers. Cingular is a joint venture of AT&T and BellSouth, which recently agreed to merge.
Technology . . . Motorola CEO Ed Zander said on the conference call: “I still am a big fan of what you can do organically. It doesn’t mean—in the case of each of these areas, we picked up some acquisitions, smaller ones… So I’m not telling you what I’m going to do or what we are going to do, forever or near-term, but I think you have got to—if you’ve got a great strategy, you’ve got great people and you can use your balance sheet effectively, you can do some amazing things. And I think you are seeing that play out in at least two of our businesses. And I think with what Adrian has put in place in Networks and what we are investing in that space, stay tuned.
