• Goldman defends dark pools, status quo. In a letter to the SEC (.pdf), Goldman Sachs (GS) dispelled five common myths about so-called 'dark pool' anonymous trading exchanges, saying the venues benefit both institutional and retail traders by reducing transaction costs and increasing competition. The rest of the 56-page document - which summarizes a Sept. 24 SEC/Goldman gettogether - sheds light on industry practices of short selling, high-frequency trading, flash trading and naked access, which have come under varying levels of criticism in recent months.
• India begins exit. With inflation pressures building, the Reserve Bank of India took the first step toward withdrawing its record fiscal stimulus by ordering lenders to keep more cash in government bonds. "It may be appropriate to sequence the 'exit' in a calibrated way," governor Duvvuri Subbarao said today after boosting the liquidity ratio to 25% from 24%. BofI kept its benchmark rates unchanged, and maintained its 6% GDP growth forecast. "We will start to see G-20 economies exiting now, starting with the emerging ones and then the advanced countries," economist Mridul Saggar said. India's BSE Sensex was down 2.3% amid a broad Asia pullback. (ETF: INP)
• New IRS group targets ultra-rich. A new IRS unit will target the ultra-wealthy by helping decode partnerships, offshore trusts and other complex techniques used to hide earnings. Speaking to an accountants' trade group Monday, IRS commissioner Doug Shulman said the new Global High Wealth Industry group will begin its first audits next month, honing in on individuals with assets or income in the tens of millions - for whom, he said, you cannot assess compliance "by looking only at their 1040s."
• Gross sees weaker U.S., pressure on Treasurys. Influential bond manager Bill Gross warned Monday that an end to the Fed's debt buyback schemes could add selling pressure to several credit markets, including U.S. Treasurys. Gross also said he believes emerging economies will grow faster than the U.S.: "The emerging world, whether it's in Asia, Australia or other associated countries, will do much better from the standpoint of growth, and that's where money should eventually move to. It moves there because of higher profits and it moves there actually because of higher real interest rates."
• China predicts more growth ahead. China reported a 190% jump in overseas investment (to $20.5B in Q3), and forecast industrial production would rise 16% in Q4 after a 13.9% gain in Q3. Analysts say Beijing may be encouraging Chinese companies to invest abroad to ease upward pressure on the yen. Last week, China reported an 8.9% gain in Q3 GDP, leading to speculation about an imminent exit from its super-loose monetary stance. This morning, Morgan Stanley's Stephen Roach said investors are wrong to bet on China reining things in: "The Chinese really are fixated on one thing and one thing alone which is social stability - they don’t want to take a risk of another negative growth surprise." (ETFs: FXI, PGJ)
• Japan's Fujii criticizes BOJ. Japan's finance minister lashed out at its central bank Tuesday, calling its view of the economy too rosy and narrowly informed. "The BOJ has repeatedly said the economy is getting better, but they are dealing with different people," Hirohisa Fujii said at a meeting. The BOJ has a developed a reputation of allowing its jawboning to push it to act in a contrary way just to demonstrate its independence. (ETF: EWJ)
• UBS hires McCann to rebuild Americas unit. UBS (UBS) named Robert McCann - former chief of Merrill Lynch's brokerage unit - to head its Americas wealth management businesses. UBS has been hurt by a tax dispute with the U.S. government, not to mention bad bets on auction-rate securities, writedowns, and capital outflows. McCann dispelled rumors the unit may be up for sale: "I had to go to court against two of my former employers to be able to work with UBS. I would have not done that if the whole goal was to sell the company." Analysts say the unit remains 'strategically challenged,' and are skeptical a new helmsman can combat the negative implications of UBS's loss of its status as banker to the ultra-secretive.
• Utex leads bidders for GE Security. Sources say United Technologies (UTX) has emerged as the frontrunner for GE's (GE) fire alarm and surveillance systems unit, which it put on the block earlier this year. A deal would bolster United's strategy of locking in revenue streams by offering multi-year service contracts for equipment and systems in commercial buildings. GE is thought to want about $2B for the unit.
• EU approves Pepsi bottlers merger. PepsiCo (PEP) received the European Commission's blessings for its $7.8B deal to buy Pepsi Bottling Group (PBG) Tuesday, despite some overlap in their businesses. "The proposed transaction would not significantly change the market structure. Consequently, the Commission concluded that the transaction would not raise competition concerns," it said.
• Europe lending dries up. Euro zone private-sector loans fell 0.3% from a year ago, the first contraction on record, but economists said a slight rise in month-over-month lending was a sign credit in the area was slowly beginning to flow again. "The year-on-year fall is going to catch everyone's imaginations, but that's a lagging indicator of what's been going on," Fortis's Nick Kounis said. Loans to households rose by €14B from August, the fifth sequential increase.
• Data point to bumpy recovery. Regional reports Monday suggested the economy is approaching levels associated with the end of recession, but isn't exactly surging to new highs. Chicago Fed's national activity index (.pdf) fell to -0.81 from -0.65 in August, with production/income making the only positive contribution. Still, the index's three-month moving average makes quite a strong case for a V-shaped recovery. Dallas Fed said Texas-area factory activity declined, and its production index moved into negative ground after leveling the month before. The Chicago Fed's manufacturing index (.pdf) rose 1% to 82.3, but remains 15.7% lower than a year ago.

Earnings: Tue. Before Open

• ACGO Corp. (AGCO): Q3 EPS of $0.13 beats by $0.09. Revenue of $1.4B (-32.7%) in-line. (PR)
• AK Steel (AKS): Q3 EPS of $0.06 beats by $0.05. Revenue of $1.04B (-51.7%) in-line. Shares +1.1% premarket. (PR)
• Avery Dennison (AVY): Q3 EPS of $0.82 beats by $0.25. Revenue of $1.55B (-10.2%) vs. $1.47B. "While the rate of volume decline in the third quarter improved compared with the first half of the year, this was largely due to a slowdown in inventory reductions. Our end-markets remain soft, and we continue to be cautious about the pace of their recovery." (PR)
• BE Aerospace (BEAV): Q3 EPS of $0.36 beats by $0.04. Revenue of $460M (-21.8%) in-line. Expects a substantial increase in earnings and revenue in 2011. (PR)
• Boyd Gaming (BYD): Q3 EPS of $0.09 misses by $0.01. Revenue of $398M (-6.6%) vs. $411M. "While visitation levels remained fairly constant, spend per visitor continues to be down significantly year-over-year, as consumers are still being cautious with their spending." (PR)
• BP (BP): Q3 earnings of $4.67B (-47%) vs. consensus of $3.25B. Sees 2009 costs down by $4B vs. a previous $3B. Total production +6.9%. Shares +5% premarket. (PR)
• Canadian Pacific Railway (CP): Q3 EPS of $0.85 beats by $0.07. Revenue of $1.09B (-14%) in-line. (PR)
• Celanese (CE): Q3 EPS of $0.58 beats by $0.15. Revenue of $1.3B (-28.5%) in-line. (PR)
• CommScope (CTV): Q3 EPS of $0.61 beats by $0.05. Revenue of $750M (-29.4%) vs. $784M. (PR)
• Convergys (CVG): Q3 EPS of $0.27 beats by $0.04. Revenue of $765M (+13.2%) vs. $653M. (PR)
• Corn Products International (CPO): Q3 EPS of $0.70 beats by $0.07. Revenue of $971M (-10.5%) vs. $983M. (PR)
• EarthLink (ELNK): Q3 EPS of $0.28 beats by $0.03. Revenue of $174M (-24.4%) in-line. Net subscriber losses of 146K, down from 149K in Q2 and 275K a year ago. Shares +3.8% premarket. (PR)
• Del Monte (FDP): Q3 EPS of $0.61 beats by $0.24. Revenue of $766M vs. $819M. (PR)
• FirstEnergy (FE): Q3 EPS of $1.11 beats by $0.06. Revenue of $3.4B (-12.8%) vs. $2.96B. (PR)
• FPL Group (FPL): Q3 EPS of $1.38 misses by $0.03. Revenue of $4.47B vs. $4.96B. Shares -3.1% premarket. (PR)
• Honda (HMC): FQ2 profit of ¥54B (-56%) beats consensus by ¥11B. U.S. vehicle sales -25% to 300K. Sees full-year net income of ¥155B, almost triple its previous forecast, and global sales of 3.4M, up 3.2%. (Bloomberg)
• Hospira (HSP): Q3 EPS of $0.90 beats by $0.21. Revenue of $1.01B (+8.9%) vs. $0.94B. Shares +3.7% premarket. (PR)
• IAC/InterActiveCorp (IACI): Q3 EPS of $0.34 beats by $0.21. Revenue of $337M (-8.9%) in-line. Shares +1.3% premarket. (PR)
• Iconix Brand Group (ICON): Q3 EPS of $0.31 beats by $0.03. Revenue of $59.4M (+7.7%) vs. $53.9M. Shares -1.3% premarket. (PR)
• Johnson Controls (JCI): FQ4 EPS of $0.52 beats by $0.01. Revenue of $7.87B (-15.5%) in-line. (PR)
• L-3 Communications (LLL): Q3 EPS of $2.12 beats by $0.27. Revenue of $3.84B (+4.9%) in-line. (PR)
• Life Technologies (LIFE): Q3 EPS of $0.73 beats by $0.11. Revenue of $805M (+2.7%) vs. $791M. Shares +4.1% premarket. (PR)
• Sonic Automotive (SAH): Q3 EPS of $0.21 misses by $0.03. Revenue of $1.52B (-5.9%) in-line. (PR)
• TD Ameritrade (AMTD): Q3 EPS of $0.26 beats by $0.04. Revenue of $658M (+1.3%) vs. $630M. Avg. client trades +35% to 411K/day. Used 70% of net income to buy back shares at average of $11.94/share. Shares +1.4% premarket. (PR)
• Textron (TXT): Q3 EPS of $0.12 vs. consensus of -$0.03. Revenue of $2.55B (-26.6%) in-line. Sees full-year EPS of $0.33-0.63 vs. consensus of -$0.06. (PR)
• Under Armour (UA): Q3 EPS of $0.52 beats by $0.08. Revenue of $270M (+16.2%) vs. $250M. Shares +1.6% premarket. (PR)
• United States Steel (X): Q3 EPS of -$2.11 beats by $0.76. Revenue of $2.82B (-61.5%) vs. $2.72B. Shipment volumes and operating rates increased significantly from the very low levels of Q2. Remains cautious in its outlook for end-user demand, as customer order rates have decreased from Q3. Shares +4.4% premarket. (PR)
• Valero (VLO): Q3 EPS of -$0.39 misses by $0.06. Revenue of $19.5B (-45.8%) vs. $18.8B. Refining margins continued to suffer from a combination of weak demand for refined products and high inventories. Shares +0.6% premarket. (PR)
• Wynn Resorts (WYNN): Q3 EPS of $0.33 beats by $0.18. Revenue of $773M vs. $743M. Shares +1.9% premarket. (PR)

Earnings: Mon. After Close

• Arris Group (ARRS): Q3 EPS of $0.25 beats by $0.01. Revenue of $276M (-7%) vs. $274M. Shares +0.7% AH. (PR)
• Baidu.com (BIDU): Q3 EPS of $2.16 beats by $0.35. Revenue of $187M (+39%) vs. $188M. Sees Q4 revenue of $174M-180M vs. $203M. Shares -13.1% AH. (PR)
• Cabot Oil & Gas (COG): Q3 EPS of $0.41 beats by $0.05. Revenue of $207M (-15%) vs. $205M. (PR)
• DryShips (DRYS): Q3 adjusted EPS of $0.27 beats by $0.07. Revenue of $228M (-30%) vs. $210M. Shares -0.3% AH. (PR)
• Flextronics International (FLEX): FQ2 EPS of $0.13 beats by $0.04. Revenue of $5.8B (+1%) in-line. Sees Q3 EPS of $0.14-0.16 vs. $0.13. Shares +2.7% AH. (PR)
• Health Management Associates (HMA): Q3 EPS of $0.10 beats by $0.01. Revenue of $1.1B (+6%) in-line. Shares -1.1% AH. (PR)
• Masco (MAS): Q3 EPS of $0.08 misses by $0.01. Revenue of $2.1B (-17%) vs. $2B. Sees full-year adjusted EPS of $0.12-0.22 vs. $0.07. Shares -0.1% AH. (PR)
• Plum Creek Timber (PCL): Q3 EPS of $0.12 beats by $0.04. Revenue of $294M (-29%) vs. $274M. Sees Q4 EPS of $0.12-0.17 vs. $0.12, and full-year EPS of $1.39-1.44 vs. $1.35. Shares +0.6% AH. (PR)
• SL Green Realty (SLG): Q3 EPS of $0.98 in-line. Revenue of $250M (-7%) vs. $224M. (PR)
• Vertex Pharmaceuticals (VRTX): Q3 EPS of -$0.71 beats by $0.10. Revenue of $25M (-21%) vs. $30M. (PR)
• VF Corp. (VFC): Q3 EPS of $1.94 misses by $0.01. Revenue of $2B (-5%) in-line. Shares -7% AH. (PR)

Today's Markets

Asia's markets dropped strongly on Tuesday, but Europe is above breakeven at midday, and futures are flat after a U.S. pullback Monday.

The current issue of the 10x45 Bargain Hunter (pdf file) stock screening report, published on August 23rd, includes a table of the Top 45 "Magic Formula" Stocks, based on current consensus estimates of this year's earnings per share. This "Magic Formula" screen is based on a methodology advocated by Superinvestor Joel Greenblatt, author of The Little Book That Beats The Market.

Here are 10 'magic formula' companies that deserve a closer look:

• AOL goes solo. Time Warner (TWX) filed with the SEC to officially turn AOL into a stand-alone, publicly traded company called AOL Inc. According to the filing, Time Warner repurchased Google's (GOOG) 5% stake in AOL for $283M earlier this month, valuing AOL at less than $5.66B vs. the $20B implied valuation the business carried in 2005.
• Speculators drove oil price spike. The Commodity Futures Trading Commission will release a report next month suggesting speculators played a major role in causing oil prices to spike, reversing an earlier finding by the CFTC that attributed oil price swings primarily to supply and demand. One of the CFTC commissioners said the original analysis was based on 'deeply flawed data.' The agency, which is shifting away from its former hands-off approach, is expected to institute rules limiting the investments of large institutions in commodities.
• AIG keeps asset sale proceeds. AIG (AIG) used $2.4B from recent asset sales to improve the capital position of its property-casualty unit rather than using the funds to pay down some of its government debt. AIG's need to use some of the sale proceeds to bolster its own businesses will undoubtedly raise questions about the insurer's ability to repay its government bailout.
• U.S. pledges to rein in deficit. At the beginning of a strategic round of talks with China, Geithner pledged to ensure a 'sustainable' U.S. budget deficit by 2013 as Chinese officials expressed concern over the security of their U.S. financial holdings. There were few signs of tensions over the value of the yuan. Both countries agreed not to prematurely withdraw economic stimulus measures.
• SEC updates short-selling rules. The SEC will no longer require institutional investors to report their short-sale positions on a weekly and confidential basis, part of an effort to curb abuse by making more information about short positions available to the public. The weekly reporting was instituted in October as an emergency measure and will expire August 1. A temporary ban on naked short selling was made permanent.
• Amgen, Glaxo reach drug agreement. Amgen (AMGN) and GlaxoSmithKline (GSK) reached an agreement to jointly market denosumab, an osteoperosis treatment that could see annual sales of $2B within a decade if approved by regulators. Glaxo will pay $120M for near-term milestones to share profits in Europe and to sell the drug in countries where Amgen doesn't have any exposure. Amgen will market the drug in the U.S. and Canada, and retain the rights to sell it for cancer in Europe once it's approved.
• Third time's the charm for Delphi. Delphi looks set to emerge from nearly four years of bankruptcy protection with its third attempt at an exit plan. Delphi's board approved an offer to split the company between former parent General Motors and lenders, replacing an agreement announced two months ago between GM and Platinum Equity. Under the new deal terms, lenders will forgive $3.4B in debt in exchange for most of the supplier's assets, and the lenders will pay cash to keep Delphi operating. GM will pay a little over $3B for four North American factories and Delphi's steering business.
• BoA to shutter branches. Bank of America (BAC) is planning to slash the company's 6,100-branch network by 10%, reversing two decades of coast-to-coast expansion. Bank officials reportedly attribute the closings to changes in customer preferences, citing the shift away from traditional branches in favor of online and mobile banking. A timeline for the closures wasn't specified.
• Reining in derivatives. Lawmakers are considering steps to curb speculation in the $39T credit default swaps [CDS] market, which could include preventing investors from speculating on a borrower's credit quality. Among the options under consideration to curb speculation are a ban on naked CDS and a requirement that derivative dealers and investment advisers managing more than $100M report their short interests in CDS contracts to the appropriate regulator.
• Magna improves bid. Magna International (MGA) reportedly improved its bid for General Motors' Opel unit, offering to inject €350M upfront vs. an earlier offer of €100M. The improved offer comes after the German government criticized all three bidders for the amount of their own capital they were willing to inject into Opel.
• CVC brews up AB InBev bid. According to media reports, private equity group CVC Capital Partners is prepared to pay up to €1.5B ($2.1B) for the Central and Eastern European assets of Anheuser-Busch InBev. AB InBev was accepting bids until yesterday, by which point CVC and TPG Capital were still in the running but KKR had dropped out.
• New homes sales (.pdf). New home sales came in at 384K in June, up 11% from May, vs. consensus of 350K. Sales were down 21.3% vs. the previous year. The median home price of $206,200 was down from May's $221,600. Inventory of 281K homes represents an 8.8 month supply, down from 10.2 months in May.

Earnings: Tuesday Before Open

• AMB Property (AMB): Q2 EPS of $0.37 beats by $0.01. Revenue of $147M (-27%) vs. $144M.
• BE Aerospace (BEAV): Q2 EPS of $0.39 beats by $0.05. Revenue of $475M (-9%) vs. $488M. (PR)
• BP (BP): Q2 EPS of $1.01 beats by $0.09. Revenue of $54.8B (-50%) vs. $64B. Shares -1.2% premarket (6:50 ET). (BP press release (.pdf))
• Celanese (CE): Q2 EPS of $0.53 beats by $0.07. Revenue of $1.2B (-33%) vs. $1.3B. (PR)
• Check Point Software (CHKP): Q2 EPS of $0.48 beats by $0.02. Revenue of $224M (+12%) vs. $220M. (PR)
• Coach (COH): FQ4 EPS of $0.43 in-line. Revenue of $778M (-0.5%) vs. $780M. (PR)
• Coventry Health Care (CVH): Q2 EPS of $0.50 beats by $0.10. Revenue of $3.5B (+19%) in-line. (PR)
• Diamondrock Hospitality Company (DRH): Q2 EPS of $0.24 beats by $0.03. Revenue of $144M (-21%) vs. $145M. (PR)
• EarthLink (ELNK): Q2 EPS of $0.29 beats by $0.03. Revenue of $186M (-24%) in-line. (PR)
• Energizer (ENR): Q2 EPS of $1.12 beats by $0.09. Revenue of $997.5M (-6.5%) vs. $1B. (PR)
• FPL Group (FPL): Q2 EPS of $0.99 beats by $0.01. Revenue of $3.8B (+6%) vs. $3.9B. (PR)
• Interpublic Group of Companies (IPG): Q2 EPS of $0.04 misses by $0.06. Revenue of $1.5B (-20%) vs. $1.6B. (PR)
• Jacobs Engineering Group (JEC): FQ3 EPS of $0.76 beats by $0.01. Revenue of $2.7B (-7%) vs. $2.8B. (PR)
• McGraw-Hill Companies (MHP): Q2 EPS of $0.58 beats by $0.03. Revenue of $1.46B (-12%) vs. $1.54B. (PR)
• National Oilwell Varco (NOV): Q2 EPS of $0.90 beats by $0.03. Revenue of $3B (-9.5%) vs. $3.1B. Shares -2.7% premarket (8:10 ET). (PR)
• Office Depot (ODP): Q2 EPS of -$0.22 misses by $0.10. Revenue of $2.8B (-22%) vs. $2.9B. (PR)
• PACCAR (PCAR): Q2 EPS of $0.07 vs. consensus of $0.04 (may not be comparable). Revenue of $1.6B (-58%) vs. $1.7B. Shares +0.9% premarket (8:30 ET). (PR)
• Patriot Coal Corporation (PCX): Q2 EPS of $0.39 vs. consensus of -$0.47 (may not be comparable). Revenue of $507M (+49.3%) vs. $518M. (PR)
• PepsiAmericas(PAS): Q2 EPS of $0.74 beats by $0.06. Revenue of $1.3B (-6%) in-line. (PR)
• Rockwell Automation (ROK): FQ3 EPS of $0.23 beats by $0.03. Revenue of $1B (-31.5%) in-line. (PR)
• Smith International (SII): Q2 EPS of $0.15 misses by $0.06. Revenue of $1.9B (-22%) vs. $2B. (PR)
• SUPERVALU (SVU): Q2 EPS of $0.55 beats by $0.02. Revenue of $12.7B (-5%) vs. $12.8B. (PR)
• Teva Pharmaceutical Industries (TEVA): Q2 EPS of $0.83 beats by $0.03. Revenue of $3.4B (+20%) vs. $3.5B. (PR)
• Textron (TXT): Q2 EPS of $0.08 beats by $0.11. Revenue of $2.6B (-29%) in-line. Lowers guidance for FY '09, sees EPS of $0.33-0.63 vs. prior $0.45-0.75, sees FY '09 revenue of ~$10.6B vs. prior $11B. (PR)
• United States Steel Corporation (X): Q2 EPS of -$3.28 beats by $0.17. Revenue of $2.1B (-68.5%) vs. $2.4B. Shares -3.7% premarket (8:30 ET). (PR)
• Valero Energy (VLO): Q2 EPS of -$0.48 beats by $0.02. Revenue of $17.9B vs. $16.3B. Shares -2% premarket (8:15 ET). (PR)
• Viacom (VIA.B): Q2 EPS of $0.49 beats by $0.01. Revenue of $3.3B (-14.5%) vs. $3.5B. (PR)
• Vishay Intertechnology (VSH): Q2 EPS of -$0.10 misses by $0.02. Revenue of $460M (-41%) vs. $459M. Issues upside guidance for Q3, sees revenue of $480-520M vs. $477M consensus. (PR)
• Waddell & Reed Financial (WDR): Q2 EPS of $0.28 beats by $0.03. Revenue of $200M (-21%) vs. $195M. (PR)
• Waters (WAT): Q2 EPS of $0.78 misses by $0.01. Revenue of $363M (-9%) vs. $366M. (PR)

Earnings: Monday After Close

• ACE Limited (ACE): Q2 EPS of $2.09 beats by $0.15. Net premiums written of $3.4B (-5%). (PR)
• Amgen (AMGN): Q2 EPS of $1.29 beats by $0.13. Revenue of $3.7B (-1%) vs. $3.6B. Raises full-year EPS guidance to $4.80-4.95 vs. $4.57. (PR)
• CF Industries (CF): Q2 EPS of $4.33 beats by $1.72. Revenue of $991M (-15%) vs. $764M. (PR)
• Crane Company (CR): Q2 EPS of $0.47 misses by $0.02. Revenue of $545M (-21%) vs. $588M. (PR)
• Desarrolladora Homex (HXM): Q2 EPS of $0.91 beats by $0.24. Revenue of $359M (+8%) vs. $329M. (PR)
• Fidelity National Financial (FNF): Q2 EPS of $0.40 beats by $0.01. Revenue of $1.6B (+34%) in-line. (PR)
• Health Management Associates (HMA): Q2 EPS of $0.13 beats by $0.03. Revenue of $1.2B (+5%) vs. $1.1B. (PR)
• Hexcel (HXL): Q2 EPS of $0.18 misses by $0.01. Revenue of $277M (-23%) vs. $302M. (PR)

• Kilroy Realty (KRC): Q2 FFO of $0.79 beats by $0.09. Revenue of $71M (+2%) vs. $66M. (PR)

When Time Warner (TWX) agreed to merge with AOL, it had an equity value of $95 billion and annual earnings of about $8 billion on revenues of $33 billion. Its portfolio of cable, publishing and movies aimed at achieving $1 billion in synergies with AOL, which generated $3 billion annual earnings on $11 billion in revenues and was valued at about $100 billion. That was nearly a decade ago.

The media and advertising worlds were very different then. The integration risks, the advent of broadband and powerful tech-savvy consumers threw the world's biggest media company and its peers for a loop. Financial projections and values turned out to be different than originally assumed. Media and Internet multiples have dropped as fast as ad revenues. Virtually nothing has turned out as planned.

Q1 2009 Earnings Call

April 28, 2009 8:30 am ET

• BoA, Citi likely need more capital. Regulators reportedly told Bank of America (BAC) and Citigroup (C) that the banks may need to raise additional capital based on early stress test results, with a capital shortfall in the billions of dollars at Bank of America. Sources say both banks, unsurprisingly, object to the preliminary findings and plan to present regulators with detailed rebuttals. Analysts also expect Regions Financial Corp. (RF), Fifth Third Bancorp (FITB) and Wells Fargo (WFC) to be among the banks most likely to need capital. Premarket: BAC -12.2%, C -8.5% (7:00 ET).
• Unstressful stress tests. Elizabeth Warren, head of the Congressional Oversight Panel for TARP, is worried the adverse scenario being used to test banks' health is 'disturbingly close' to current economic conditions, and that there may need to be a second set of stress tests if the economy worsens. She also expressed her disappointment that the government's description of its methodology lacked critical details. Warren wants to see enough details provided by the Federal Reserve to allow outsiders to run their own versions of stress tests. "The stress tests will make a terrific contribution if they are tough and transparent," she said. "If they are not, they will be useless."
• GM's survival plan looks shaky. General Motors (GM) presented its final plan to restructure outside of bankruptcy by cutting debt, eliminating over 21,000 more U.S. jobs and nationalizing itself by giving majority control to the government. The company said it will file for bankruptcy if its proposed debt swap fails to reduce $27B in bond debt by around 90%. Analysts doubt the debt exchange will succeed, and bondholders blasted the terms of the deal, setting GM up for a likely bankruptcy. In response to the nationalization proposal, which would put 89% of the company in the ownership of the government and the UAW union and present the government with several potential conflicts, a White House spokesman clarified "it is not our desire to either own or run one of the auto companies." Shares -2.5% premarket, after a 20.7% gain yesterday (7:00 ET).
• UAW to get 55% Chrysler stake. The tentative agreement reached between Chrysler and the United Auto Workers union would eventually give the UAW 55% ownership in a restructured Chrysler. Chrysler will also issue a $4.59B note to the health-care trust fund that the union will manage for retired workers. Fiat will 'eventually' end up with a 35% stake, while the government and Chrysler's secured lenders will get 10% ownership. Separately, Daimler agreed to give up its remaining 19.9% stake in Chrysler and pay up to $600M into the automaker's pension fund.
• BP profit fall prompts spending cuts. BP's (BP) Q1 net income fell to $2.56B ($0.14/share) from $7.09B ($0.37/share) the year before, prompting the oil company to cut its 2009 spending target for a second time to less than $20B. Despite the profit slump, the company still beat analyst estimates with adjusted earnings of $2.58B vs. $2.2B consensus. BP raised its quarterly dividend 4% to $0.14 per common share. Shares +1.9% premarket (7:00 ET).
• SEC freezes financier's assets. The SEC froze the assets of financier Danny Pang and two of his firms, accusing Pang of defrauding investors of hundreds of millions of dollars. Regulators say Pang faked his resume, forged documents, pledged unrealistic returns and paid investors with cash raised from new ones.
• Deutsche posts profit on I-bank income. Deutsche Bank (DB) returned to profitability in Q1 with net income of €1.19B as trading income rose at its investment bank. Investors remain concerned about the possibility of future writedowns and as earnings from so-called stable businesses missed analysts' expectations. CEO Josef Ackermann agreed to extend his contract by three years. Shares -4.0% premarket (7:00 ET).
• Citi to sell Japan units. Citigroup (C) will reportedly sell most of its Nikko Cordial Securities Inc. and Nikko Citigroup Ltd. businesses in Japan to Sumitomo Mitsui Financial Group (SMFJY.PK) for over ¥500B ($5.2B). Citigroup paid ¥1.6T for Nikko Cordial in January 2008. The Nikkei newspaper says a deal will be announced by the end of the week.
• IBM, Brocade deepen ties. IBM (IBM) and Brocade Communications Systems (BRCD) are strengthening their relationship, and IBM will rebrand ethernet switching and routing products made by Brocade as IBM products and sell them to mutual corporate customers. The move comes amid increasing rivalry between IBM and Cisco (CSCO).
• Swine flu fears continue. The World Health Organization raised its alert level to phase 4 as suspected cases of swine flu rose worldwide, and said containment of the outbreak is not feasible. Fears about the possible pandemic pushed down share prices of travel stocks for the second day in a row.
• Amazon buys e-book firm. Amazon (AMZN) added to its growing portfolio of e-book offerings with the acquisition of Lexcycle Inc., a company that makes a popular e-book reading application for the iPhone (AAPL). Terms of the deal were not disclosed.
• McDonald's reaches drinks deals. Dr. Pepper Snapple Group (DPS) and Coca-Cola (KO) reached deals with McDonald's (MCD) to give the beverage companies' brands a wider presence in McDonald's stores.

Earnings: Tuesday Before Open

• AGCO (AG): Q1 EPS of $0.36 beats by $0.13. Revenue of $1.6B (-11.6%) in-line. Shares -0.7% premarket (8:20 ET). (PR)
• American Greetings (AM): FQ4 EPS of $0.26 beats by $0.01. Revenue of $442.5M (-10.3%) vs. $467.3M. (PR)
• Becton, Dickinson and Co. (BDX): FQ2 EPS of $1.18 beats by $0.02. Revenue of $1.74B (-0.4%) vs. $1.76B. (PR)
• Bemis (BMS): Q1 EPS of $0.43 beats by $0.09. Revenue of $843M (-11%) vs. $873M. Reaffirms FY '09 guidance, sees EPS of $1.50-$1.70. (PR)
• Bristol-Myers Squibb (BMY): Q1 EPS of $0.48 in-line. Revenue of $5.0B (+2.5%) vs. $5.1B. (PR)
• Celanese (CE): Q1 EPS of $0.08 beats by $0.18. Revenue of $1.15B (-37.9%) vs. $1.25B. (PR)
• Coca-Cola Enterprises (CCE): Q1 EPS of $0.20 beats by $0.15. Revenue of $5.05B (+3.2%) vs. $4.86B. Issues upside guidance for FY '09, sees EPS of $1.24-$1.29 vs. $1.20 consensus. (PR)
• Coventry Health Care (CVH): Q1 EPS of $0.30 beats by $0.05. Revenue of $3.6B (+21.5%) vs. $3.4B. Sees FY '09 EPS of $1.70-$1.90, revenue of $13.59B-$13.99B. (PR)
• EarthLink (ELNK): Q1 EPS of $0.30 beats by $0.03. Revenue of $199M (-24.3%) vs. $203M. (PR)
• EMCOR Group (EME): Q1 EPS of $0.55 beats by $0.22. Revenue of $1.4B (-16.1%) vs. $1.5B. (PR)
• FirstMerit (FMER): Q1 EPS of $0.36 beats by $0.09. (PR)
• FPL Group (FPL): Q1 EPS of $0.90 beats by $0.13. Revenue of $3.7B (+7.9%) vs. $3.6B. Issues upside EPS guidance for FY '09 of $4.20-$4.40 vs. $4.06 consensus. Issues upside EPS guidance for FY '10 of $4.65-$5.05 vs. $4.56 consensus. (PR)
• HCP Inc. (HCP): Q1 EPS of $0.50 misses by $0.03. Revenue of $252M (+2.8%) vs. $256M. (PR)
• Hecla Mining (HL): Q1 EPS of $0.02 beats by $0.08. Revenue of $55M (+45.9%) vs. $48M. Shares -3.8% premarket (8:10 ET). (PR)
• Hospira (HSP): Q1 EPS of $0.60 beats by $0.05. Revenue of $860M (-3.3%) vs. $859M. Issues in-line guidance for FY '09, sees EPS of $2.67-$2.72 vs. $2.67 consensus. (PR)
• Interpublic Group of Companies (IPG): Q1 EPS of -$0.16 beats by $0.04. Revenue of $1.3B (-10.8%) in-line. (PR)
• Lazard (LAZ): Q1 EPS of $0.26 misses by $0.57. Revenue of $273M (-20%) vs. $342M. "We have accelerated our major global hiring initiative at the senior level. We are reinforcing our areas of strength, investing in areas of growth, developing new products, containing costs and maintaining liquidity, in order to take advantage of current and future opportunities. Our planning is to have significantly improved revenues during the second half of the year." (PR)
• Level 3 Communications (LVLT): Q1 EPS of -$0.08 in-line. Revenue of $980M (-10.3%) vs. $1.03B. (PR)
• McGraw-Hill Companies (MHP): Q1 EPS of $0.20 beats by $0.02. Revenue of $1.15B (-5.7%) in-line. (PR)
• Nexen (NXY): Q1 EPS of $0.26 beats by $0.13. Revenue of $1.05B (-44%) vs. $1.36B. (PR)
• Office Depot (ODP): Q1 EPS of -$0.10 in-line. Revenue of $3.22B (-18.6%) vs. $3.26B. (PR)
• Paccar (PCAR): Q1 EPS of $0.07 beats by $0.02. Revenue of $1.7B (-52.2%) vs. $1.9B. (PR)
• Petro-Canada (PCZ): Q1 EPS of $0.23 misses by $0.15. Cuts 2009 capex by $600M to $3.4B. Announces a quarterly dividend of $0.20 per common share. (PR)
• Pfizer (PFE): Q1 EPS of $0.54 beats by $0.05. Revenue of $10.87B vs. $11.08B. Sees full-year EPS of $1.85-1.95 vs. consensus of $1.95 and revenue of $44-46B vs. $46.1B. (PR)
• Potlatch (PCH): Q1 EPS of $0.72 beats by $0.14. Revenue of $130M (+15.1%) vs. $112M. (PR)
• Rockwell Collins (COL): FQ2 EPS of $1.03 beats by $0.05. Revenue of $1.1B (-4%) in-line. Issues downside guidance for FY '09, sees EPS of $3.70-$3.90 vs. previous guidance of $4.10-$4.30. See FY '09 revenues of about $4.5B vs. $4.68B consensus. Shares -3.5% premarket (7:40 ET). (PR)
• Scotts Miracle-Gro Company (SMG): FQ2 EPS of $1.25 beats by $0.01. Revenue of $960M (+0.2%) vs. $1.0B. Issues downside guidance for FY '09, sees EPS of $2.20-$2.30. (PR)
• Tellabs (TLAB): Q1 EPS of $0.05 beats by $0.02. Revenue of $362M (-22.1%) vs. $359M. (PR)
• Valero Energy (VLO): Q1 EPS of $0.59 beats by $0.09. Revenue of $13.8B (-50.5%) vs. $19.9B. Shares +2.5% premarket (8:00 ET). (PR)
• Vishay Intertechnology (VSH): Q1 EPS of -$0.16 beats by $0.01. Revenue of $449.5M (-38.7%) vs. $470.6M. (PR)
• Waddell & Reed Financial (WDR): Q1 EPS of $0.22 beats by $0.02. Revenue of $177M (-24.5%) vs. $185M. (PR)
• Waters Corp. (WAT): Q1 EPS of $0.74 beats by $0.16. Revenue of $333M (-10.4%) vs. $338M. (PR)

Earnings: Monday After Close

• Albemarle (ALB): Q1 EPS of $0.28 in-line. Revenue of $487M (-27.2%) vs. $559M. (PR)
• Axis Capital (AXS): Q1 EPS of $1.05 misses by $0.06. Revenue of $715M vs. $786M. (PR)
• Baidu.com (BIDU): Q1 EPS of $0.86 beats by $0.10. Revenue of $119M (+41.5%) vs. $116M. Shares +3.4% AH. (PR)
• Compass Minerals (CMP): Q1 EPS of $1.85 misses by $0.29. Revenue of $309M (-18.7%) vs. $384M. Expects weak potash sales through Q2, but says they may pick up in H2. Shares -7.1% AH. (PR)
• DaVita (DVA): Q1 EPS of $0.92 beats by $0.01. Revenue of $1.45B (+7.7%) in-line. Reiterates operating-income guidance. (PR)
• Emulex (ELX): FQ3 EPS of $0.05 beats by $0.01. Revenue of $78.6M (-38.5%) vs. $80.7M. Sees FQ4 EPS of $0.01-0.05 vs. consensus of $0.06 and revenue of $73-80M vs. $82.7M. Shares +2% AH. (PR)
• Fidelity National Financial (FNF): Q1 EPS of -$0.06 misses by $0.18. Revenue of $1.36B (+20.4%) vs. $1.48B. Shares -0.2% AH. (PR)
• Hanesbrands (HBI): Q1 EPS of $0.03 beats by $0.08. Revenue of $858M (-13.2%) vs. $871M. Shares -5.4% AH. (PR)
• Health Management Associates (HMA): Q1 EPS of $0.15 beats by $0.03. Revenue of $1.19B (+3.1%) in-line. Provision for bad accounts was $144M (12.1% of net revenue) vs. $129M (11.2%) a year ago. Shares -1.2% AH. (PR)
• Hexcel (HXL): Q1 EPS of $0.24 beats by $0.05. Revenue of $307M (-10.8%) vs. $334M. "Our previous planning assumption for flat to modest growth seems too optimistic and we are redoubling our efforts to manage costs." Shares +2.8% AH. (PR)
• Jacobs Engineering Group (JEC): FQ2 EPS of $0.88 misses by $0.01. Revenue of $2.98B (+11.7%) vs. $3.13B. Sees full-year EPS of $3.10-3.50 vs. $3.59 consensus. (PR)
• Masco (MAS): Q1 EPS of $0.23 misses by $0.11. Revenue of $1.82B (-25.8%) vs. $1.88B. Full-year EPS guidance in-line. Sees full-year sales down 20-25% vs. a previous mid-to-high teens decline. Shares -1% AH. (PR)
• Meritage Homes (MTH): Q1 EPS of -$0.60 beats by $0.58. Revenue of $231M (-37.8%) vs. $201M. (PR)
• Olin (OLN): Q1 EPS of $0.60 misses by $0.03. Revenue of $401M (+0.4%) vs. $458M. Shares -4% AH. (PR)
• Plum Creek Timber (PCL): Q1 EPS of $0.95 beats by $0.01. Revenue of $470M (+29.5%) vs. $506M. Full-year guidance in line. (PR)
• SL Green Realty (SLG): Q1 EPS of $1.48 in-line. Revenue of $196.5M (+1.4%) vs. $213M. Shares -8.4% AH. (PR)
• Southwestern Energy Company (SWN): Q1 EPS of $0.36 beats by $0.05. Revenue of $541M (+3.2%) vs. $450M. Shares +1.1% AH. (PR)
• United States Steel (X): Q1 EPS of -$3.84 misses by $2.15. Revenue of $2.75B (-47.1%) vs. $3.14B. "Continues to face an extremely difficult global economic environment." Cuts dividend to $0.05 from $0.30. Will offer 18M shares and $300M in notes to pay back debt. Shares -7.4% AH. (PR)
• Weingarten Realty (WRI): Q1 FFO of $0.77 beats by $0.17. Revenue of $149.3M (-1.5%) vs. $146.2M. Shares +2.3% AH. (PR)
• W.R. Berkely (WRB): Q1 EPS of $0.25 misses by $0.12. Revenue of $964M vs. $1.11B. (PR)
• XL Capital (XL): Q1 EPS of $0.63 misses by $0.01. Revenue of $1.53B vs. $1.88B. Sold more than 70% ($1.3B) of the securities related to its Q4 restructuring charge. Shares -5.2% AH. (PR)

Today's Markets

Overseas markets moved lower Tuesday.

Yesterday there were a couple of posts about how tech stocks are currently especially attractive because they hold plenty of cash and tend to have little debt. Paul Kedrosky initially caught my eye with his post "Tech Cash is King" which in turn pointed me to a story on Bloomberg by Eric Martin.

I ran a screen last night that looked at both cash and debt. Specifically, I screened for a Price-to-Cash ratio under three, a Debt-to-Equity ratio under three and a Market Cap greater than $2.5 million. Based on these criteria, I obtained a list of 136 stocks.

Sentiment

The S&P 500 Index (.SPX) is down 23.76 to 809.98 and at session lows heading into the final hour of trading Thursday. After a day of quiet trading Wednesday, the Dow Jones Industrial Average opened lower and a wave of selling sent the financials broadly lower early. The Dow had lost more than 200 points during the first hour of trading. The situation stabilized in morning action and trading had turned mixed midday, with the NASDAQ posting modest gains around Noon ET. However, another barrage of selling hit late in the day after crude oil gave up early gains and sank below $34 a barrel. A CNBC report that Goldman Sachs (GS) held an emergency investor meeting Tuesday appeared to affect trading as well. The investment bank promptly denied the report, but the damage had been done.

Meanwhile, a report that showed a surprise uptick in retail sales released Thursday morning had little market impact. According to the Commerce Department, sales increased 1 percent during the first month of 2009. Economists had expected a .8 percent drop. Instead, investors seemed more concerned about the lack of progress being made with respect to the fiscal stimulus bill and the financial rescue package. Shares of the major banks are still reeling, with BofA (BAC), Citi (C), and American Express (AXP) leading the Dow Jones Industrial Average to a 225-point afternoon loss. The CBOE Volatility Index (.VIX) is up 1.81 to 46.34. Approximately 5.4 million calls and 5.2 million puts have traded so far.

Q4 2008 Earnings Call.

February 05, 2009, 08:30 AM ET

• Profits amiss, Swiss Re gets Buffett boost. Warren Buffett's Berkshire Hathaway (BRK.A) will invest around 3B Swiss francs ($2.6B) in Swiss Reinsurance (SWCEY.PK) to help the firm raise its capital levels and protect its AA credit rating. In return, Swiss Re will issue a bond with a coupon of 12% which can later be converted into shares, potentially giving Berkshire a stake of over 20% in the world's second-biggest reinsurer. Swiss Re, which has suffered heavy losses from its credit default swaps exposure and wrote down 6B Swiss francs in toxic assets, expects to post a net loss of around 1B Swiss francs for 2008 and may eventually seek another 2B Swiss francs in addition to Buffett's capital injection. The company will also cut its dividend and disband part of its asset-management unit. CEO Jacques Aigrain said the company was "disappointed with our overall results in 2008," but that Buffett's investment "is a testament to the strength of our franchise." Shares -16.6% in Switzerland (7:00 ET).
• Buy American, sort of. The Senate has softened the 'Buy American' plan in its $900B stimulus bill after Obama expressed concern that the original language could trigger a trade war. The new amendment requires the Buy American provision to be "applied in a manner consistent with U.S. obligations under international agreements," providing some relief to Canada, Mexico, the EU and other major trading partners. Some Senators went even further, trying to remove the Buy American provision altogether, but failed to garner the necessary votes. McCain, an opponent of the provision, warned it has "echoes of the disastrous Smoot-Hawley tariff act... It sends a message to the world that the United States is going back to protectionism." Meanwhile, many foreign firms, trying to win a piece of the stimulus package, are increasing their American presence.
• Watchdog calls for government investment strategy. According to a report issued today by a government watchdog, the U.S. needs to develop an investment strategy for its recently acquired holdings. To date, the U.S. government has collected over $271M in dividends from ownership stakes in American banks and holds $279.2B in preferred shares from 319 financial institutions, as well as common stock warrants from 230 institutions. The report also raised questions about potential fraud issues in the Fed's Term Asset-Backed Loan Facility (TALF).
• Parts suppliers want part of bailout. U.S. auto-parts makers are seeking up to $25.5B in federal aid as the auto industry gets slammed, forcing broad production cuts among automakers. Suppliers are asking for $8B in direct federal loans, $7B to flow through automakers so suppliers can be paid in ten days instead of the traditional 45, and $10.5B to guarantee receivables of suppliers whose customers have taken federal loans. Without immediate aid, industry representatives say hundreds of parts suppliers will close or file for bankruptcy.
• Revolving door for Volvo. Looking for cash to avoid a federal bailout, sources say Ford (F) is in talks to sell its Volvo unit to China's Geely Automobile Holdings. Ford has also approached two other Chinese automakers, and will likely recoup less than the $6.4B it paid for Volvo in 1999. The U.S. automaker has already received commitments from Export-Import Bank of China to provide the necessary financing for an acquisition. Ford creditors would likely receive some or all of the proceeds from a Volvo sale.
• P&G gamble on getting out of pharma. Procter & Gamble (PG) is looking to exit the pharmaceutical business, and has hired Goldman Sachs (GS) to identify possible buyers for its pharmaceutical brands. P&G's pharma unit accounts for global sales of over $2B. The company announced in December that it had stopped investing in new drug development, citing the need to create 'maximum value' for shareholders.
• Cisco profit chill. Cisco (CSCO) posted a 27% drop in FQ2 earnings on weaker sales and higher costs, though the firm still managed to report slightly better figures than Wall Street expected (see earnings details below). Cisco also issued a disappointing sales forecast for the current quarter, forecasting a 15-20% drop from last year, or roughly $7.8B-$8.3B less. Analysts had expected sales of about $8.7B. CEO John Chambers expressed optimism about the company, telling analysts "this downturn, in my opinion, is both the biggest challenge of our lifetime, but also represents the biggest opportunity to transform our company as well as our economy through a series of bold steps." (Read the earnings call transcript.)
• Overseas credit use lifts Visa. Profit rose 35% at Visa (V), thanks to a gain in non-U.S. consumers using credit and debit cards (see earnings details below). CEO Joe Saunders said Visa is 'steadfast' in its guidance that EPS will rise at least 20% this year, highlighting the company's "processed transaction growth, the strength of debit, and the global diversity of our business." Total volume rose 44% in Central Europe, the Middle East and Africa, 27% in Latin America and the Caribbean and 20% in the Asia-Pacific region vs. just 7.1% growth in the U.S.
• Congressional hearings on Madoff. Harry Markopolos testified before Congress yesterday, slamming the SEC for 'financial illiteracy' on the Madoff case and for 'an abject failure by the regulatory agencies we entrust as our watchdog.' Markopolos also lodged a serious accusation against the Wall Street Journal, saying "I believe that senior editors of the [Wall Street] Journal respected and feared Mr. Madoff" and wouldn't allow senior investigative reporter John Wilke to pursue the matter when contacted in December 2005. (Read Markopolos' full testimony - .pdf)
• Job cuts soar. According to Challenger, firing announcements rose an astounding 222% last month from January 2008, to 241,749. "Even if the stimulus package is successful, it could take months to make a noticeable impact on the employment picture. There is no light at the end of the tunnel." ADP reported nonfarm employment decreased 522,000 in January, a drop less than the 535K consensus. The goods-producing sector declined for the 24th consecutive month. Employment in the manufacturing sector fell for the 28th time over the last 29 months.
• Online recruiting weakens again. Monster's online employment index dipped 13 points in January to 118 as online recruiting slowed for the fourth straight month. It's down 26% from a year ago - a more negative pace than the previous three months, suggesting further deterioration in labor market conditions. Arts, entertainment, and recreation remains the weakest trending industry, indicating further softening in consumer leisure spending activity. "The fact that employers have chosen to begin recruiting in 2009 on a cautious note is not surprising given the uncertain nature of the global economy," it said.
• Non-mfg sector contracts. Economic activity in the non-manufacturing sector contracted in January, registering 42.9% on the ISM Index vs. December's 40.1%. This was the fourth month in a row of sector contraction, though the rate has slowed slightly.
• BoE rate cut. The Bank of England cut its key lending rate to 1% from 1.5%, as expected. BoE has brought its rate down from 5% in October as the world economy worsened and the U.K. slipped into recession.

Earnings: Thursday Before Open

• Alpha Natural Resources (ANR): Q4 EPS of -$0.07 misses by $0.29. Revenue of $594M (+16.3%) vs. $631M. (PR)
• Brookfield Properties (BPO): Q4 EPS of $0.49 beats by $0.12. Revenue of $717M (-12.9%) vs. $582M. (PR)
• Bunge (BG): Q4 EPS of -$1.89 misses by $1.60. Revenue of $10.9B (-12.3%) vs. $12.0B. (PR)
• Burger King (BKC): FQ2 EPS of $0.33 misses by $0.04. Revenue of $634M (+3.4%) vs. $659M. (PR)
• Cardinal Health (CAH): FQ2 EPS of $0.93 beats by $0.03. Revenue of $25.1B (+7.8%) vs. $24.5B. (PR)
• CIGNA (CI): Q4 EPS of $0.49 beats by $0.08. Revenue of $4.8B (+6.7%) vs. $4.75B. (PR)
• Cincinnati Bell (CBB): Q4 EPS of $0.10 in-line. Revenue of $356.8M (-0.9%) vs. $349.9M. (PR)
• Cincinnati Financial (CINF): Q4 EPS of $0.57 in-line. Revenue of $1.0B (+4.2%) vs. $915M. (PR)
• Deutsche Bank (DB): Q4 net loss of €4.8B - its first in more than 50 years - including a €5.8B trading loss. Net interest income rose to €3.76B from €2.69B a year ago. But January revenue rose "significantly" to €2.8B, giving CEO Josef Ackermann "confidence" for 2009. Shares -3.4% premarket. (Bloomberg)
• Diamond Offshore Drilling (DO): Q4 EPS of $2.11 misses by $0.23. Revenue of $903M (+45.3%) vs. $912M. (PR)
• Domtar Corp (UFS): Q4 EPS of -$0.04 misses by $0.10. Revenue of $1.5B (-11.4%) in-line. (PR)
• Duke Energy (DUK): Q4 EPS of $0.27 beats by $0.02. Revenue of $3.1B (+3.4%) in-line. (PR)
• EarthLink (ELNK): Q4 EPS of $0.25 misses by $0.13. Revenue of $216M (-23.4%) in-line. (PR)
• Estee Lauder Companies (EL): FQ2 EPS of $0.80 beats by $0.03. Revenue of $2.0B (-11.6%) in-line. (PR)
• FLIR Systems (FLIR): Q4 EPS of $0.41 beats by $0.03. Revenue of $302M (+24.6%) vs. $315M. (PR)
• Flowers Foods (FLO): Q4 EPS of $0.34 beats by $0.03. Revenue of $621.6M (+31.2%) vs. $620.3M. (PR)
• IMS Health (RX): Q4 EPS of $0.50 in-line. Revenue of $580.9M (-4.1%) vs. $609.3M. (PR)
• Kellogg (K): Q4 EPS of $0.53 beats by $0.03. Revenue of $2.93B (+5%) vs. $3.05B. Peanut-related recall will cost it $0.06/share. (PR)
• Kimco Realty (KIM): Q4 EPS of $0.04 misses by $0.03. Revenue of $197M (+10.7%) vs. $190M. (PR)
• MasterCard (MA): Q4 EPS of $1.87 beats by $0.26. Revenue of $1.23B (+14.2%) in-line. Gross dollar volume up 3.4% to $605B. Shares +4.9% premarket. (PR)
• MF Global (MF): FQ3 EPS of $0.13 in-line. Revenue of $422M (+0.9%) vs. $368M. (PR)
• Moody's (MCO): Q4 EPS of $0.37 beats by $0.09. Revenue of $403.7M (-20%) vs. $387.1M. (PR)
• NCR (NCR): Q4 EPS of $0.58 beats by $0.04. Revenue of $1.42B (-6.6%) vs. $1.5B. (PR)
• Sally Beauty (SBH): FQ1 EPS of $0.10 misses by $0.03. Revenue of $645.6M (-1.6%) vs. $689.8M. (PR)
• Spectra Energy (SE): Q4 EPS of $0.32 beats by $0.02. Revenue of $1.3B (-9.1%) in-line. (PR)
• Spirit AeroSystems (SPR): Q4 EPS of $0.14 misses by $0.21. Revenue of $646.1M vs. $730.2M. (PR)
• Western Union (WU): Q4 EPS of $0.37 beats by $0.03. Revenue of $1.29B (-1.3%) vs. $1.37B. (PR)

Earnings: Wednesday After Close

• 99 Cents Only Stores (NDN): FQ3 EPS of $0.18 misses by $0.01. Revenue of $351M (+8%) vs. $327M. Shares +0.1% AH. (PR)
• Akamai Technologies (AKAM): Q4 EPS of $0.44 beats by $0.04. Revenue of $213M vs. $205M. Shares +7.1% AH. (PR)(earnings transcript)
• Assurant (AIZ): Q4 EPS of $1.31 misses by $0.23. Revenue of $2.22B (+1.7%) vs. $2.32B. (PR)
• Atmel (ATML): Q4 EPS of $0.01 beats by $0.04. Revenue of $335M vs. $339M. Won't provide Q1 guidance due to uncertain economic environment. Shares -3.7% AH. (PR)(earnings transcript)
• AvalonBay Communities (AVB): Q4 FFO of $0.30 misses by $0.01. Sees 2009 FFO of $4.50-4.80 vs. $4.82. (PR)
• BMC Software (BMC): FQ3 EPS of $0.64 beats by $0.05. Revenue of $488M (+6.4%) in-line. Sees 2009 EPS of $2.20-2.30 vs. $2.19. Shares +4.7% AH. (PR)(earnings transcript)
• Cadence (CDNS): Q4 EPS of -$0.04 misses by $0.02. Revenue of $227M vs. $218M. Shares flat AH. (PR)(earnings transcript)
• CBL & Associates Properties (CBL): Q4 FFO of $0.80 vs. consensus of $0.96. Revenue of $299M vs. $295M. Sees 2009 FFO of $3.10-3.25 vs. $3.21. Shares +16% AH. (PR)
• Cisco Systems (CSCO): FQ2 EPS of $0.32 beats by $0.02. Revenue of $9.09B vs. $9B. Remains comfortable with long-term vision. Shares -4.4% AH. (PR)(earnings transcript)
• EOG Resources (EOG): Q4 EPS of $0.74 vs. consensus of $1.04. Revenue of $1.63B (+27%) vs. $1.28B. Shares +0.6% AH. (PR)
• Equifax (EFX): Q4 EPS of $0.61 beats by $0.02. Revenue of $447M (-9%) vs. $453M. Sees Q1 EPS of $0.52-0.57 vs. $0.59. (PR)
• Equity Residential (EQR): Q4 FFO of -$0.13 misses by $0.02. Revenue of $530M (+5.4%) vs. $538M. Sees 2009 FFO of $2.00-2.30 vs. $2.37. Shares -2% AH. (PR)
• Harman (HAR): FQ2 EPS of $0.18 misses by $0.35. Revenue of $756M (-29.1%) vs. $798M. Plans to shave another 1,100 bringing total to 2,000. Shares -10.6% AH. (PR)(earnings transcript)
• Harris (HRS): FQ2 EPS of $1.08 beats by $0.06. Revenue of $1.52B vs. $1.47B. Sees 2009 EPS of $3.93-4.03 vs. $4.10. Shares -4.5% AH. (PR)(earnings transcript)
• Novellus Systems (NVLS): Q4 EPS of -$0.21 misses by $0.04. Revenue of $188M in-line. Shares -6.4% AH. (PR)(earnings transcript)
• ON Semiconductor (ONNN): Q4 EPS of $0.15 beats by $0.06. Revenue of $489M (+19.8%) vs. $485M. Sees Q1 revenue of $340-380M vs. $411M. Shares -1.6% AH. (PR)(earnings transcript)
• Prudential Financial (PRU): Q4 EPS of -$2.04 vs. consensus of -$1.19. Revenue of $5.9B vs. $6.35B. Sees 2009 EPS of $5.25-5.65 vs. $5.56. Shares -1.5% AH. (PR)
• Pulte Homes (PHM): Q4 EPS of -$1.33 vs. consensus of -$0.71. Revenue of $1.65B (-43.1%) vs. $1.44B. New home orders down 61% to 1,763. Backlog of $631M vs. $2.5B a year ago. Ends quarter with $1.7B in cash, no debt. Shares -2.6% AH. (PR)
• Sunoco (SUN): Q4 EPS of $2.68 vs. consensus of $2.15. Revenue of $9.14B (-30.6%) vs. $12.46B. Record revenue from its non-refining business. Shares -2.1% AH. (PR)
• THQ (THQI): FQ3 EPS of -$0.14 misses by $0.21. Revenue of $386M (-24.3%) vs. $403M. Continues to experience a cautious retail and consumer environment. No FQ4 guidance. Shares -15% AH. (PR)(earnings transcript)
• Torchmark (TMK): Q4 EPS of $1.40 misses by $0.10. Revenue of $M in-line. Sees 2009 EPS of $6.05-6.25 vs. $6.24. Shares +1.5% AH. (PR)
• Visa (V): FQ1 EPS of $0.78 beats by $0.12. Revenue of $1.74B vs. $1.68B. Payments volume +12% to $701B. Total volume +16% to $1.1T. Shares +7.9% AH. (PR)(earnings transcript)

Today's Markets

• Asia markets closed mostly down. Nikkei -1.1% to 7,950. Hang Seng +0.9% to 13,179. Shanghai -0.5% to 2,098. BSE -1.2% to 9,091.
• In Europe at midday, London -0.2%. Paris -0.8%. Frankfurt -0.5%.
• U.S. futures: Dow +0.1%. S&P -0.1%. Nasdaq -1.5%. Crude +0.4% to $40.47. Gold +1.7% to $917.60.

Thursday's Economic Calendar

• Retail Same-Store Sales
  Monster Employment Index
  7:00 BoE Announcement
  7:45 ECB Announcement
  8:30 Jobless Claims
  8:30 Productivity and Costs
  9:00 RBC CASH Index
  10:00 Factory Orders
  10:30 EIA Natural Gas Report
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ANR, BG, BKC, BPO, CAH, CBB, CI, CINF, DO, DUK, EL, ELNK, FLIR, FLO, K, KIM, MA, MCO, MF, NCR, RX, SBH, SE, SPR, UFS, WU
• Notable earnings after Thursday's close: ALKS, ESLR, HIG, JDSU, NFX, PBI, PWAV, SRCL, SWKS, THOR, VRSN

Seeking Alpha editor Eli Hoffmann contributed to this post.

F3Q08 Earnings Call

October 28, 2008 8:30 am ET

• Bigger profits for BP. BP (BP) reported Q3 results this morning, including a better-than-expected 83% rise in quarterly net profit thanks to higher oil prices. Net profit for Q3 totalled $8.05B, as compared to $4.41B a year earlier, and beat estimates of $6.78B. Revenue rose to $104.8B from $72.8B. The company's underlying rise in production, adjusting for fluctuations in oil price, was 5% on the year. Shares +7.0% pre-market.
• Financial crisis saps SAP. This morning, SAP AG (SAP) released Q3 earnings far short of analyst expectations (see below). The world's largest maker of business-management software also withdrew its 2008 sales forecast and lowered its profit-margin target in light of the global economic downturn. The adjusted operating margin will be around 28% vs. earlier forecasts of 28.5%-29%. SAP will also cut R&D spending, freeze hiring and curb travel expenses. Shares -7.7% in German trading.
• 5,000 layoffs at Whirlpool. Whirlpool (WHR), the world's largest appliance maker, will eliminate 5,000 jobs by the end of 2009 to cut costs amid reduced demand and a global credit crisis. "We are in the midst of a rapidly changing and very challenging economic environment. We have seen a sharp drop in demand in North America and Europe during the third quarter, and we do not expect demand conditions to improve in the near term," CEO Jeff Fettig said. "The global credit crisis has had a profound negative impact on what was already a weakening and very fragile global economy. Declining home values, rising unemployment and very low consumer confidence levels will likely prolong a negative demand environment at least through the middle of 2009." Along with factory closings, the moves will produce $275M/year in savings.
• Banks balk on Huntsman sale. Chemical producer Huntsman (HUN) has been informed by Hexion that its proposed $5.6B, $28/share buyout will not close today because the banks that were to fund the deal - Deutsche Bank (DB) and Credit Suisse (CS) - no longer plan to do so. Hexion is trying to "resolve the banks' concerns and is still seeking to close the merger," Huntsman said. Hexion previously tried to break off the deal, but was ordered by a Delaware court to proceed.
• Government may broker GM/Chrysler deal. There is a push within the government to release some of the $25B in auto-industry-earmarked Treasury funds, sources say, a move that could send ongoing merger talks between GM (GM) and Chrysler into high gear. A possible $5B loan, toward the $10B the pair would need to deal with layoffs and plant closures, would come from a $25B pool of low-interest loans being administered by the Energy Department. The money was originally intended to speed the availability of fuel-saving technologies. On Monday Moody's downgraded the pair, saying "GM's liquidity profile will continue to erode in 2009" even with the government program.
• GE borrows Fed funds. General Electric (GE) tapped the Federal Reserve's new commercial-paper facility, borrowing under $5B yesterday when the facility debuted. With $88B in short-term loans, GE is the largest borrower in the $1.5T commercial-paper market. Though the company has managed to meet its funding needs, market turmoil has forced up GE's borrowing costs, providing GE with a vested interest in making sure the Fed's new facility is effective. GE and its financial services arm are eligible to borrow up to $96B from the new Fed program.
• Volkswagen takes pole position. Volkswagen (VLKAY.PK) surpassed ExxonMobil (XOM) to become the world's biggest company by market cap after Porsche announced plans to raise its stake in the German carmaker to 75% from 42.6%, triggering a short squeeze. Shares rose as much as 93% yesterday, and were up another 55% in Frankfurt this morning, bringing its market value to €296B ($370) vs. Exxon's $343B. As of Oct. 23, almost 13% of Volkswagen's shares were on loan, mostly to short sellers who were forced to swallow massive losses and exit their positions. "Volkswagen has been one of the greatest shorts of hedge funds, and it's been an absolute, absolute disaster," GLG Partner's Emmanuel Roman said. Elsewhere around the globe, carmakers are struggling with plunging sales and a lack of cash.
• Markets rally, Treasurys drop. U.S. Treasurys fell in overnight trading (see below) as global markets rallied, and as it becomes clear the government needs to borrow enormous amounts of money to help pay for its costly financial rescue framework. "Increasing supply will help push up yields," Credit Suisse fixed income strategist Rasmus Rousing said. "We're also seeing a slight reversal of stock-market declines of the last few days (see below) and that's helping to take some buying interest out of Treasurys." Today's record $34B note auction could be a tough sell.
• Rescue plan hits a snag. The $700B financial rescue plan is being delayed due to difficulties in hiring asset managers to oversee the program. On Oct. 3 the Treasury said it would quickly hire asset managers so that the program could be up and running within a few weeks. Sources say hurdles include issues over the fees the government will pay asset managers and a lack of manpower at Treasury. They also say Allianz's (AZ) Pimco will likely be named as an asset manager. Fees could be about 0.15% to 0.20% of assets under management, compared to a more typical 0.35%. The longer the delay, the greater the risk investors will lose confidence in the plan's efficacy.
• Barclays in talks with Russia banks for capital boost. Barclays (BCS) is seeking investments from two state-backed Russian banks - OAO VTB and OAO Sberbank - in an effort to boost its capital. Barclays plans to raise £6.5B ($10.34B) from private sources to meet government capital requirements, rather than accepting government largesse which comes with limitations such as a limit of dividends.
• Google strikes back against Viacom. Google (GOOG) fired back against Viacom (VIA) in its $1B lawsuit by demanding the internal records of copyright police service BayTSP Inc. Google alleges the documents will refute Viacom's assertion it's uncapable of monitoring improper use of its content; will demonstrate Viacom routinely uploaded its own content to Google's YouTube; and that BayTSP "remained silent" about copyright infringement for a months-long period in late 2006, then deluged it with more than 100,000 requests to take down infringing material in a single day as a prelude to Viacom's lawsuit. Viacom is suing Google for more than $1B; Google argues it isn't legally liable for copyrighted material uploaded to YouTube.
• September new home sales rose slightly to 464K/year vs. 450K consensus. Sales are up 2.7% from August's revised data, but are down 33.1% Y/Y.

Earnings: Tuesday Before Open

• Amedisys (AMED): Q3 EPS of $0.89 beats by $0.07. Revenue of $322M (+77.7%) vs. $312M. [PR]
• Ashland (ASH): FQ4 EPS of -$0.01 misses by $0.31. Revenue of $2.2B (+6.3%) in-line. [PR]
• Boyd Gaming (BYD): Q3 EPS of $0.16 misses by $0.03. Revenue of $426M (-13.0%) vs. $440M. [PR]
• BP (BP): Q3 net profit of $8.05B vs. $6.78B. Revenue of $104.8B vs. $72.8B last year.
• Check Point Software Technologies (CHKP): Q3 EPS of $0.44 beats by $0.01. Revenue of $200M (+8.5%) in-line. [PR]
• EarthLink (ELNK): Q3 EPS of $0.49 beats by $0.09. Revenue of $231M (-22.6%) vs. $230M. [PR]
• Entergy (ETR): Q3 EPS of $2.50 misses by $0.02. Revenue of $3.96B (+20.5%) vs. $3.86B. [PR]
• Health Management Associates (HMA): Q3 EPS of $0.07 misses by $0.01. Revenue of $1.1B (+3.4%) in-line. [PR]
• Interpublic Group of Companies (IPG): Q3 EPS of $0.08 beats by $0.02. Revenue of $1.74B (+11.5%) vs. $1.65B. [PR]
• Masco (MAS): Q3 EPS of $0.10 misses by $0.09. Revenue of $2.5B (-15.9%) in-line. [PR]
• SAP AG (SAP): Q3 EPS of $0.41 misses by $0.16. Revenue of $2.8B (+15.8%) vs. $4.0B. [PR]
• Smith International (SII): Q3 EPS of $1.01 beats by $0.04. Revenue of $2.85B (+26.9%) vs. $2.71B. [PR]
• Whirlpool (WHR): Q3 EPS of $2.15 beats by $0.46. Revenue of $4.90B (+1.3%) vs. $5.0B. [PR]

Earnings: Monday After Close

• Atheros Communications (ATHR): Q3 EPS of $0.37 beats by $0.02. Revenue of $138M in-line. Shares +3.8%. (PR)
• Buffalo Wild Wings (BWLD): Q3 EPS of $0.25 misses by $0.06. Revenue of $106M vs. $104M. Shares -13.9%. (PR)
• Choice Hotels International (CHH): Q3 EPS of $0.57 beats by $0.01. Revenue of $179M vs. $191M. Shares -2.9%. (PR)
• Parexel International (PRXL): FQ1 EPS of $0.23 beats by $0.01. Revenue of $320M vs. $274M. Sees FQ2 EPS of $0.18-0.20 vs. $0.27. Shares -13.1%. (PR)
• Rent-A-Center (RCII): Q3 EPS of $0.44 misses by $0.48. Revenue of $709M vs. $700M. Sees Q4 revenue of $698-713M vs. $721M. Shares -9.6%. (PR)
• Texas Roadhouse (TXRH): Q3 EPS of $0.12 misses by $0.01. Revenue of $218M in-line. Shares -4.6%. (PR)
• Universal Health Services (UHS): Q3 EPS of $0.73 misses by $0.04. Revenue of $1.24B in-line. (PR)
• Wausau Paper (WPP): Q3 EPS of $0.08 beats by $0.02. Revenue of $312M in-line. (PR)
• WMS Industries (WMS): FQ1 EPS of $0.27 beats by $0.02. Revenue of $151M vs. $148M. (PR)

Today's Markets

• Asia markets posted a strong comeback, led by Hong Kong +14.35% to 12,596. Nikkei +6.41% to 7622. Shanghai +2.81% to 1772. BSE Sensex closed.
• In Europe at midday, gains across the board. London +2.4%. Paris +2.6%. Frankfurt +5.8% led by Volkswagen.
• U.S. futures are back at yesterday's pre-late-day-selloff levels. Dow +4.3% to 8353. S&P +4.5%. Nasdaq +4%.
• Crude +11.9% to $64.42. Gold +0.2% to $743.
• 30-year bond -0.77%. 10-year not -0.61%. 5-year -0.36%. 2-year -0.08%.

Tuesday's Economic Calendar

• FOMC meeting begins
  7:45 ICSC Retail Store Sales
  8:55 Redbook
  9:00 S&P/Case-Shiller Home Price Index
  10:00 Consumer Confidence
  10:00 Richmond Fed's Manufacturing Index
  10:45 Treasury's Paulson speaks on capital markets
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: AMED, ASH, BP, BYD, CHKP, CVG, EL, ELNK, ETR, FMER, HMA, IPG, KSU, MAS, MHP, OXY, RCL, SAP, SCHN, SEPR, SII, TIN, UA, USG, VLO, VSH, WDR, WHR, X
• Notable earnings after Tuesday's close: ACE, ALGN, AMX, APOL, ARRS, BMRN, BXP, CBI, CEPH, CPHD, CTX, DRIV, DWA, EAC, FISV, FLS, FMC, LNC, MCK, MOLX, MTW, NLC, PMTC, RFMD, STM, WLT, WRB, XRAY

Seeking Alpha editor Rachael Granby contributed to this post.

Now that Sprint's (S) long-awaited Xohm service has launched in Baltimore to mostly positive reviews, researchers, bloggers, and journalists are beginning to place their bets on the upcoming battle between WiMAX and long term evolution (LTE), its toughest challenger.

Researchers at In-Stat have struck the first blow for WiMAX, concluding in a new report that WiMAX is likely to "outpace" LTE over the next few years, though both technologies are still years away from full implementation. In-Stat argues that because LTE will not be ready for at least another year or two, the timing of network roll-outs favors WiMAX technology.

EarthLink (ELNK) is the third largest Internet service provider in the U.S., servicing over 3.6 million consumer and small business customers. The company provides about a third of those customers with broadband access, and the rest through premium dial-up, which EarthLink looks to be a leader in this market. You read that right - EarthLink's strategy is to be the leader in servicing the premium dial-up Internet access market.

Obviously, with that strategy revenue growth is not a priority here. Subscriber count was down 27% in 2006. So far, for 2008, revenues have been down over 21% from 2007 levels. Broadband is a lower margin business, so as more and more dial-up customers convert over, operating margins may take a hit. Growing the dial-up subscriber base will have to be achieved by buying existing customers from legacy providers, such as AOL or MSN. Clearly, growth here isn't going to come from the top line. This business will likely see declining sales for the foreseeable future.

In Part One, I showed the results that I observed when I ran some parameters through Yahoo Stock Screener. That search was aimed at finding large, reasonably priced stocks that were likely to hold up well during the turbulent times that are seeing now.

This search is a bit different. While Small-cap (and many Mid-cap) stocks have been badly beaten up in this downturn, I wanted to find Smaller companies that have displayed a proven track record of growing their earnings, were still reasonably priced and had good growth prospects for the next few years. These are the stocks that are likely to be early contributors when investors finally rotate money back into this "sector" of the market. As a warning, it is likely a bit too early to take a full position in these stocks now, but taking a partial position wouldn't be a bad idea.

By definition, a market is made when someone wanting to buy something finds someone willing to sell it. But if that's the case, why can't EarthLink Inc. (ELNK) and AOL LLC find a way to work out a deal for AOL's dial-up Internet assets? The answer, as it often does in a transaction, revolves around money.

AOL parent Time-Warner Inc. (TWX) on Wednesday said it would formally separate AOL's dial-up access business and content and advertising businesses early in 2009, presumably making it easier for the New York-based media conglomerate to sell both units. Weakness in the Internet division was blamed to a large extent for a drop in Time-Warner's second-quarter income.

Time Warner (TWX) has reportedly completed its internal restructuring so it can officially separate AOL’s dial-up business from its content and advertising assets. The split is likely to become official when Time Warner delivers earnings on Wednesday. The big question: Who is buying?

This move is a bit overdue. The Wall Street Journal reports:

Shares of EarthLink Inc. (ELNK) were down 3% in early trading on Wednesday after rallying 10% on Tuesday following release of the Internet service provider's second quarter earnings. Speculation continues on whether EarthLink will acquire the dial-up business of rival AOL LLC, particularly after comments the company made during its conference call on Tuesday and a Wall Street Journal interview with company CEO Rolla Huff.

Huff told the newspaper that a merger of the two businesses would create cost savings and better service, which would benefit both customers and shareholders of both companies and that it was something he thinks is "worth aggressively pursuing."

Q2 2008 Earnings Call

July 29, 2008 8:30 am ET