Q3 2009 Earnings Call

October 28, 2009; 10:00am ET

• GMAC needs third lifeline. GMAC Financial Services and the Treasury are reportedly in advanced talks to prop up the auto-lender with its third helping of taxpayer money, making it the first of the stress-tested banks to need additional government capital. Treasury will likely inject another $2.8-5.6B into GMAC in exchange for preferred shares, bringing its total investment in GMAC thus far to $15.3-18.1B, for which it currently owns 35.4% of the firm. Sources say the FDIC has also agreed to backstop another $2.9B of GMAC's debt to facilitate day-to-day lending. The government's willingness to deepen taxpayer exposure to GMAC reflects the troubled lender's importance to the revival of the auto industry.
• Consumer confidence dips. A lower-than-expected consumer confidence reading sent a chill through markets Tuesday. Conference Board's index came in at 47.7, down from 53.4 a month ago, and lower than consensus estimates of 53.2. A plunge in expectations (65.7 vs. 73.3 in Sept.) led the way down. "Consumers' assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment," the group said, noting its Present Situation Index is now at a 26-year low. Analysts struggled to find an obvious explanation for the decline, but noted the drop didn't bode well for recovery hopes.
• Risk appetite withers. State Street's investor confidence index fell 10 points to 108.4, the lowest since April, with the most pronounced decline seen among North American investors (-12.8 to 101.1). European investors were also much more subdued (-9.3 to 101.8), but confidence rose among Asian investors, albeit to a level that still trails the U.S. and Europe (+2.4 to 95.3). "Institutional investors have paused to take stock," index co-developer Ken Froot said. "While the U.S. earnings season has been relatively robust so far, the number of positive surprises that have been observed in employment, retail sales, manufacturing and trade figures has diminished considerably, and this may be influencing investor risk appetite."
• Easing Hilton's towering debt load. Sources say Blackstone (BX) is in talks with lenders to shave about $5B off Hilton Worldwide's $20B debt load. Specifically, Blackstone is considering coughing up another $800M in equity to buy back debt at a discount (on top of its $5.6B original investment), and would like to extend debt maturing in 2013 to 2016. With capital markets reopening over the past six months, private-equity firms are using a variety of schemes (exchange offers, repurchases, tender offers) to refinance and extend the maturities on highly-leveraged debt taken on during the heyday, staving off default.
• Panel backs hedge-fund clampdown. The House Financial Services Committee overwhelmingly passed a bill that would require advisers to hedge funds, private equity and offshore funds to register with regulators, bringing some transparency to the loosely-policed industry. The bill, however, exempts venture capital funds and funds with less than $150M - which SEC chief Mary Schapiro warned "could come back to haunt investors in later years."
• Tackling too-big-to-fail. Rep. Barney Frank unveiled legislation to monitor and dissolve systemically critical financial institutions. Under the proposal, costs for taking over and euthanizing a failed bank would be paid for by shareholders and bondholders, with taxpayers temporarily covering the overflow until an assessment is rendered against the failed bank's surviving peers. A council of regulators - including the FDIC, Treasury, Fed and SEC - would be in charge of monitoring the conglomerates and invoking a wind-down if necessary.
• That's a good czar. While so-called pay czar Kenneth Feinberg's new rules for TARP backed firms cut compensation by about half, they also boosted base salaries by 14% to an average of $438K/year after executives complained, according to an analysis in today's WSJ. The move appears to contradict Feinberg's stated goal of tying pay to long-term performance, and "deepens the confusion and skepticism" surrounding the types of pay systems the government is promoting.
• Ford shows why it's #1. Consumer Reports' much-awaited yearly car reliability survey held few surprises, with foreign automakers dominating its top-10 list, and domestic brands prominently featured on its least-reliable tally. Scion took top spot, followed by Honda (HMC), Toyota (TM) and Infiniti (NSANY). Ford (F), at #10, was the only U.S. carmaker to make the grade. Least reliable brands were Chrysler, Cadillac, Dodge and Jeep. Media reports yesterday claimed Fiat models will drive Chrysler's turnaround efforts, but with new cars not due until 2012, it's unclear whether Chrysler has enough staying power in its balance sheet.
• Ruiz pegged as AMD insider. Sources say former AMD (AMD) CEO Hector Ruiz is the insider government officials have identified as providing nonpublic information to Galleon's insider trading scheme. Prosecutors released fragments of recorded conversations between an unnamed AMD executive and a Galleon employee in which they allegedly discuss the timing of the spinoff of AMD’s plants before the deal was announced in Sept. 2008. Ruiz hasn’t been charged, and prosecutors don’t say he profited from insider trading.
• Gloom on economy spreads. Americans are growing increasingly pessimistic about the economy after a mild upswing in September, according to WSJ/NBC's monthly poll released Wednesday. For the first time during the Obama presidency, a majority of those polled now see the country as being on the wrong track. Fifty-eight percent think the economic slide still has a ways to go, up from 52% in September, while only 29% think we've hit bottom, down from 35%.
• Mortgage apps drop for second straight week. Mortgage applications fell another 12.3% following a 13.7% drop last week, even as the average rate for 30-year mortgages inched down to 5.04% from 5.07% a week ago. Refinancing was 16.2% lower.
• Ford picks Geely. Ford (F) selected a group led by China's Geely as the preferred bidder for its Volvo unit, a senior Geely executive said. Geely and Ford will now enter into exclusive negotiations over Volvo.

Earnings: Wed. Before Open

• ArcelorMittal (MT): Q3 income of $1.59B vs. consensus of $1.78B. Sees Q4 income of $2-2.4B. "We have seen the first signs of recovery in Q3... We should continue to see further gradual improvement through 2010, although the operating environment remains challenging." Shares -0.8% premarket. (PR)
• Ashland (ASH): FQ4 EPS of $0.96 beats by $0.06. Revenue of $2.11B (-4.6%) in-line. "Demand appears to be showing some signs of growth in many end markets." (PR)
• BorgWarner (BWA): Q3 EPS of $0.15 beats by $0.05. Revenue of $1.03B (-22%) in-line. "We continue to be cautiously optimistic about Q4." (PR)
• ConocoPhillips (COP): Q3 EPS of $1.00 beats by $0.06. Shares -0.1% premarket. (PR)
• Enterprise Products Partners L.P. (EPD): Q3 EPS of $0.36 misses by $0.06. Revenue of $4.6B (-27%) vs. $4.73B. (PR)
• CenterPoint Energy (CNP): Q3 EPS of $0.31 misses by $0.01. Revenue of $1.58B (-37.3%) in-line. (PR)
• Coca-Cola Enterprises (CCE): Q3 EPS of $0.51 beats by $0.05. Revenue of $5.57B (-3%) vs. $5.71B. (PR)
• General Dynamics (GD): Q3 EPS of $1.48 beats by $0.08. Revenue of $7.72B (+8.1%) in-line. (PR)
• Goodyear Tire & Rubber (GT): Q3 EPS of $0.45 beats by $0.05. Revenue of $4.38B (-15.2%) in-line. Shares +1.8% premarket. (PR)
• Hess (HES): Q3 EPS of $1.05 vs. consensus of $0.55. Revenue of $7.27B vs. $7.75B. Shares +1.8% premarket. (PR)
• Jones Apparel Group (JNY): Q3 EPS of $0.46 beats by $0.19. Revenue of $856M (-11.3%) vs. $867M. "We are cautiously optimistic that the holiday season will generate better financial results across the industry." Shares -13.8% premarket. (PR)
• International Paper (IP): Q3 EPS of $0.37 beats by $0.13. Revenue of $5.92B (-13.1%) in-line. "At the end of Q3, we began to see some modest improvements in demand in some segments of our paper and packaging businesses." Shares +3.8% premarket. (PR)
• Lazard (LAZ): Q3 EPS of $0.41 beats by $0.04. Revenue of $431M (-1.3%) vs. $400M. Believes corporate defaults will remain at high levels, on a more global scale than during the last cycle, and therefore expects that its restructuring business will continue to be very active. (PR)
• Level 3 Communications (LVLT): Q3 EPS of -$0.10 in-line. Revenue of $916M (-14.4%) vs. $926M. Shares -4.4% premarket. (PR)
• MeadWestvaco (MWV): Q3 EPS of $0.50 beats by $0.23. Revenue of $1.63B (-10.2%) in-line. "Given continued global economic uncertainty, future results are difficult to predict." (PR)
• Newell Rubbermaid (NWL): Q3 EPS of $0.38 beats by $0.03. Revenue of $1.45B (-17.7%) in-line. (PR)
• New York Community Bancorp (NYB): Q3 EPS of $0.26 in-line. "Although certain economic data suggests that the recession has ended, the Metro New York region we serve continues to be under duress." (PR)
• Nexen (NXY): Q3 EPS of C$0.23 beats by C$0.08. Revenue of C$1.1B (-50.4%) vs. $924M. Shares -0.1% premarket. (PR)
• Nomura (NMR): Q2 net income of ¥27.7B ($303M) vs. consensus of ¥11.5B. Revenue of ¥355B vs. ¥258B last year. Resumes ¥4/share dividend. (Bloomberg)
• Owens Corning (OC): Q3 EPS of $0.61 beats by $0.22. Revenue of $1.35B (-17.2%) in-line. On track to surpass $160M in cost savings this year. Shares +1.5% premarket. (PR)
• Praxair (PX): Q3 EPS of $1.02 beats by $0.02. Revenue of $2.29B (-19.8%) in-line. "Business conditions stabilized globally during the quarter... The strongest pick-up was in Asia and South America, where government stimulus programs have increased domestic demand and industrial production." (PR)
• Qwest Communications International (Q): Q3 EPS of $0.09 beats by $0.02. Revenue of $3.05B (-9.6%) in-line. Shares +3.5% premarket. (PR)
• SAP AG (SAP): Q3 net income of €435M vs. consensus of €454M. Sales of €2.51B vs. €2.63B. "While we are seeing signs of stabilization in the general environment, the market remains difficult. Q3 software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan." Shares -7.6% premarket. (PR)
• Southern Company (SO): Q3 EPS of $0.99 beats by $0.01. Revenue of $4.68B (-13.8%) vs. $5.5B. (PR)
• SPX Corp. (SPW): Q3 EPS of $ beats by $. Revenue of $1.17B (-20.8%) in line. Sees full-year EPS of $3.80-4.00 vs. $3.96 consensus. "The global economic environment remains difficult and continues to impact our performance. Although some macroeconomic trends appear to be pointing toward a recovery, we expect our recovery to lag the broader economy." (PR)
• United Microelectronics (UMC): Q3 EPS of $0.08 beats by $0.04. Revenue of $853M (+11.1%) vs. $809M. (PR)
• WellPoint (WLP): Q3 EPS of $1.78 beats by $0.40. Revenue of $15.21B (+784%) in-line. Medical enrollment fell 1.5M to 35.3M, primarily due to the recession and a rise in unemployment. Shares -14.3% premarket. (PR)
• Wyndham (WYN): Q3 EPS of $0.58 beats by $0.02. Revenue of $1.02B (-17.1%) in-line. Shares +1% premarket. (PR)

Earnings: Tue. After Close

• Ace (ACE): Q3 EPS of $2.07 beats by $0.10. Revenue of $3.39B (-6%) vs. $3.33B. Expects meaningfully stronger revenue growth in Q4. Shares +2.3% AH. (PR)
• Amkor Technology (AMKR): Q3 EPS of $0.12 misses by $0.07. Revenue of $616M (-14%) vs. $604M. Sees Q4 EPS of $0.17-0.23 vs. $0.16. Shares -1.5% AH. (PR)
• Apollo Group (APOL): FQ4 EPS of $1.06 beats by $0.02. Revenue of $1.08B (+30%) vs. $1.03B. Announces an informal SEC inquiry into revenue recognition practices. Shares -19.8% AH. (PR)
• Boston Properties (BXP): Q3 FFO of $1.13 beats by $0.03. Revenue of $359M (+6%) vs. $353M. Sees Q4 FFO of $1.04-1.06 vs. $1.09. (PR)
• Century Aluminum Company (CENX): Q3 EPS of $0.45. Revenue of $229M (-59%) vs. $225M. Results impacted by $55.6M net after-tax benefit related to contract replacement. Shares +3.8% AH. (PR)
• Cephalon (CEPH): Q3 EPS of $1.62 beats by $0.21. Revenue of $549M (+10%) vs. $559M. Sees full-year sales of $2.125B-2.175B vs. $2.22B. Shares +1.4% AH. (PR)
• Chicago Bridge & Iron (CBI): Q3 EPS of $0.42 beats by $0.03. Revenue of $1B (-38%) vs. $1.1B. Shares +5.4% AH. (PR)
• Dreamworks Animation (DWA): Q3 EPS of $0.23 beats by $0.07. Revenue of $135M (-10.6%) vs. $129M. Shares +0.4% AH. (PR)
• E*TRADE Financial (ETFC): Q3 EPS of -$0.05 beats by $0.01. At-risk delinquencies declined by 10% and provision for loan losses decreased by $57M to $347M. Shares +0.6% AH. (PR)
• Fiserv (FISV): Q3 EPS of $0.92 in-line. Revenue of $992M (-5%) vs. $1.05B. Shares -2.6% AH. (PR)
• Harris (HRS): FQ1 EPS of $0.83 beats by $0.06. Revenue of $1.2B (-3%) in-line. Shares +5.4% AH. (PR)
• Illumina (ILMN): Q3 EPS of $0.17 misses by $0.03. Revenue of $158M (+5%) vs. $167M. Shares -14.8% AH. (PR)
• Integrated Device Technology (IDTI): FQ2 EPS of $0.07 beats by $0.05. Revenue of $140M (-30%) vs. $131M. Shares +4.2% AH. (PR)
• Massey Energy Company (MEE): Q3 EPS of $0.19 beats by $0.01. Revenue of $642M (-16%) vs. $677M. Shares -7.4% AH. (PR)
• McKesson (MCK): FQ2 EPS of $1.11 beats by $0.09. Revenue of $27.1B (+1.9%) vs. $26.75B. Sees full-year EPS of $4.45-4.60 vs. consensus of $4.29. Shares +1.9% AH. (PR)
• Molex (MOLX): FQ1 EPS of $0.18 beats by $0.03. Revenue of $674M (-20%) vs. $661M. Sees Q2 EPS of $0.11-0.15 vs. $0.19, including pretax restructuring charge of about $0.07 after tax. Shares -1% AH. (PR)
• Nalco Company (NLC): Q3 EPS of $0.20 misses by $0.05. Revenue of $957M (-14%) vs. $961M. (PR)
• Norfolk Southern (NSC): Q3 EPS of $0.81 beats by $0.03. Revenue of $2.1B (-29%) in-line. Shares +1.8% AH. (PR)
• Panera Bread Company (PNRA): Q3 EPS of $0.61 beats by $0.03. Revenue of $335M (+6%) vs. $334M. Same-store sales increased 3.3%. Sees Q4 EPS of $0.85-0.87 vs. $0.85, and full-year EPS of $3.05-3.15 vs. $3.04. Shares +5.2% AH. (PR)
• Pharmaceutical Product Development (PPDI): Q3 EPS of $0.32 in-line. Revenue of $341M (-13%) vs. $334M. Sees full-year EPS of $1.38-1.40 vs. $1.34, on revenue of $1.29B-1.32B vs. $1.34B. Shares +0.2% AH. (PR)
• RF Micro Devices (RFMD): FQ2 EPS of $0.13 beats by $0.04. Revenue of $255M (-6%) vs. $234M. Shares +7.1% AH. (PR)
• ValueClick (VCLK): Q3 EPS of $0.15 beats by $0.01. Revenue of $130M (-12.1%) vs. $129M. Sees Q4 EPS of $0.15-0.16 vs. consensus of $0.17 on revenue of $128-138M vs. $142M. Shares +1.8% AH. (PR)
• Visa (V): FQ4 EPS of $0.74 beats by $0.02. Revenue of $1.9B (+10%) vs. $1.8B. Sees 2010 revenue growth at lower end of 11-15% range. Sees 2011 growth of more than 20%. Shares +1.9% AH. (PR)

Today's Markets

Overseas markets moved lower Wednesday and futures are under pressure.

Before we get to these two reports, we will get little preview of what we might see out of XOM and CVX. Two lesser known and smaller companies in terms of market capitalization will report before the market opens on Wednesday.

Since the 1973 oil embargo, if not before, the price of a barrel of crude oil has been a key benchmark for investors of all stripes. It has become an indicator of economic health, both from a physical usage standpoint as well as from a financial perspective as its dollar denomination has made it a proxy for the strength and weakness of the currency in which it is priced.

We are now in a time when many of the factors affecting the price of oil, more typically exhibited one at a time, are all swirling simultaneously. As a sign of global economic activity the move off of prices in the $40s was welcomed as an indication that mankind had not been wiped off the face of the earth. Not welcomed would be another move up to the mid-July highs of 2008 but the combination of factors that pushed prices there are unlikely to be seen again. At least until a bigger, better bubble machine is built.

Ranked #3 on Forbes' Best Brokerage Analysts for 2009, Oppenheimer Senior Analyst Fadel Gheit sat down with The Energy Report to shed light on existing conditions in the oil and gas sector. In terms of oil prices, "financial players are more in control now than oil companies or OPEC," according to Fadel, who is currently more bullish on gas than on oil. "Despite the fact that gas stocks gained significantly this year," he says, "we think the upside potential remains great."

The Energy Report: Why is there such a high ratio and differential between natural gas and oil right now?

Wednesday, the federal government’s Energy Information Administration (EIA) reported an unexpected decline in crude stockpiles. However, the report also showed a larger-than-anticipated buildup in gasoline and distillate inventories, thereby offsetting the positive impact.

In its release, the agency said that crude inventories fell by 1 million barrels for the week ending October 2, against market expectations of a buildup. The primary reason for the surprise drop was a fall in crude oil imports and stronger refiner demand. This is in contrast to the previous week’s report, when U.S. commercial crude oil stocks rose more than expected on slower demand.

Bullish Calls:

Bank of Ireland (IRE), Allied Irish Banks (AIB): "I've been doing some work on these and I'll recommend them"

The U.S. Energy Department's weekly inventory release showed a sharp drop in crude stockpiles. However, this piece of positive data was somewhat tempered by reports of increases in refined product supplies like gasoline and distillate fuels.

The federal government’s Energy Information Administration (EIA) reported a 4.7 million barrels drop in crude inventories for the week ending September 11, far more than analyst expectations. This is the second successive week in which the crude drawdown has been more than originally anticipated. Major contributing factor to the inventory drop was a fall in crude oil imports.

Today is the six-month anniversary of the S&P 500's closing low in March. Over that time, the S&P 500 has rallied over 50%, taking every stock up with it...well almost. During what has been the most powerful rally that most people will see in their lifetimes, there are actually 10 stocks in the S&P 500 that have declined in value. These "Biggest Losers" are highlighted below.

By David Russell

The bulls are targeting Hess (HES), looking for the oil company to stage a significant rally in coming weeks.

Hedge fund manager Greenlight Capital sold out of a number of positions over the second quarter of 2009. Overall, the firm made purchases of $417mm, while selling $1,148mm, for a net change of $730mm.

Since there seemed to be no broad trends regarding Greenlight Capital’s investments over the quarter, it is clear the firm screened equity investments on a company by company basis. The four new purchases made over the quarter include two insurers, a healthcare company, and a natural gas producer:

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is George Soros' hedge fund firm, Soros Fund Management. Soros is one of the gurus we track on the blog due to his excellent track record and insightful macro take on things. His current take on the crisis and financial markets is laid out in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you'll understand why.

Saturday’s Wall Street Journal carried a story (subscription required) on the potential for proposed new CFTC rules to restrict issuance of shares of commodity ETFs. The withdrawal of earlier grants of rule exemptions has already led certain ETFs to suspend new share issuance. As the Journal story notes, this has driven UNG, the natural gas ETF, to trade to a 16% premium to net asset value.

There is clearly an increased focus at the CFTC in protecting market integrity through the imposition of position limits, rules which restrict the amount of interest in a market for any non-commercial entity. To date, most of the truly effective ways of implementing this (e.g., extending the restrictions to the OTC swap market and international regulatory coordination) are still on the drawing board. However, if the CFTC does move forward in this direction there will be significant investment implications.

By Brandon Clay

“How much do you make?” It’s one of those taboo questions that usually goes unasked during polite dinner conversation. But after a few beers, the vocal chords are often limbered enough to divulge family secrets. Tax return numbers may slip off the tongue. Even so, such private matters are usually not shouted to the whole room. That’s in the real world.

As oil sold off over 6% Tuesday, I was searching for some companies to buy on the dip. I decided to look at opening the position with the buy/write option strategy, as this would give me a return if oil rallies, as well as protect my position to the downside if oil continued to slide.

As recently stated on OptionMaestro.com, I believed oil would peak in early to mid July. However if we keep hearing of these "green shoots" and the stock market continues to rally, I believe oil could continue to rally as well, and as late as October in my opinion. I don't think $75 a barrel oil is out of the question, especially on the back of a weak dollar.

Q2 2009 Earnings Call

July 29, 2009 10:00 AM EST

Sentiment

Stocks are trading broadly lower after a second day of weak economic data and falling commodities prices conspired to weigh on investor sentiment Wednesday. The day after a report on July consumer confidence fell short of economist projections, a report released before the bell showed orders for durable goods falling 2.5 percent in June, well below expectations for a .6 percent decline.

Meanwhile, falling commodity prices seemed to add to the worries about the global economic outlook. Crude oil is reeling, down $4.32 to $62.91 a barrel. Meanwhile, gold fell another $11.20 to $930.50 an ounce.

• MSFT, Yahoo reach search deal. At long last, sources say Microsoft (MSFT) and Yahoo (YHOO) have reached a search deal and will announce it within the next 24 hours. Yahoo will use Microsoft's Bing search-engine technology on its own sites, including the Bing brand, and will supply search text ads on its sites and some of Microsoft's. The deal appears to be structured as a revenue share with no upfront fee, with Yahoo taking 110% the first two years and 90% in the third. The deal is on a smaller scale than previously envisioned, but both Microsoft and Yahoo are hoping that a combined attack will be more effective against Google (GOOG). UPDATE: Microsoft, Yahoo officially announce the deal. Premarket: MSFT +0.8%, YHOO -5.8% (8:30 ET).
• Say-on-pay makes headway. A congressional committee approved a bill that would put new restrictions on executive pay, giving shareholders the right to cast non-binding annual votes on executive compensation and special pay packages, and enabling regulators to ban pay structures that incentivize inappropriate risk-taking. The House of Representatives is expected to vote on the measure on Friday.
• Santander plans bank IPO. Banco Santander (STD) will spin off its Brazilian unit in an initial public offering that could raise at least $3B, creating one of the biggest publicly listed banks in Latin America. The listing will likely occur in the next three months.
• Nasdaq backs flash trading ban. As the debate on flash trading heats up, Sen. Charles Schumer said the Nasdaq Stock Market supports a ban on the trading practice and only 'reluctantly' started offering flashes early last month. Meanwhile, the SEC was apparently investigating the practice even before Schumer's letter calling for action, and may move to ban flash trading 'within the next couple of weeks.'
• Sprint buys Virgin Mobile. Sprint (S) agreed to buy Virgin Mobile USA (VM) for $5.50/share ($483M) in an all-stock deal, and will retire $205M of Virgin's debt. Sprint already owns 13.1% of Virgin, which offers cheap prepaid wireless plans. Sprint is hoping the cheaper, non-contract service will help stem a tide of customer defections.
• IBM buys software maker. IBM (IBM) will buy SPSS for $1.2B, a 42% premium on SPSS' closing price on Monday. The deal, the latest in a series of IBM acquisitions, expands IBM's software portfolio and is a further sign of improvement in the technology sector deal market. The deal should be completed by year-end.
• NJ sues Merrill. New Jersey is suing Merrill Lynch, alleging the firm sold the state's investment division $300M in preferred stock based on misleading information. New Jersey officials said if the state's investment unit "had known Merrill’s true financial condition, it would not have participated in the January 2008 offering and would not have agreed to a conversion in July 2008."
• GM returns to car loans. After a year-long hiatus, General Motors plans to get back into the car-leasing business and is said to be eyeing August 1 as its re-entry date. GM has said credit availability is still hurting auto sales, and that its exit from the leasing business forced many customers to defect to other automakers. Rivals including Ford (F) and Toyota (TM) have scaled back their leasing but haven't pulled out of the business entirely.
• Apple bars Google Voice app. Apple (AAPL) banned two iPhone applications based on Google Voice (GOOG) as the rivalry between the two tech giants grows. An Apple representative said some of the applications offered functions too close to what the iPhone already provides.
• American Air expects alliance approval. American Airlines (AMR) said it expects to win approval by October to form an alliance with British Airways (BAIRY.PK) and Iberia. The airline is betting on intra-alliance competition and global partnerships to help it survive.
• KKR preps Dollar General IPO. Kohlberg Kravis Roberts is reportedly in advanced preparations for an initial public offering of Dollar General and will also serve as one of the lead underwriters of the deal. It marks the first time KKR will underwrite one of its own IPOs as it tries to strengthen its reputation ahead of its own planned listing.
• SEC files fraud charges. The SEC filed suit against four individuals, accusing them of fraud in connection to over $197M raised from at least 900 investors nationwide which was funnelled to a commercial real estate venture. The SEC contends the defendants made "material misrepresentations to investors," including false claims about the use of the funds and the safety of investments.
• Home prices improve (.pdf). The S&P/Case-Shiller 20-City Home Price Index was -17.1% in May vs. last year, narrower than last month's 18.1% drop, and the fourth monthly improvement in a row as "the pace of descent in home price values appears to be slowing." The 0.5% month-on-month increase was the first uptick in three years.
• Consumer confidence. Conference Board's July Consumer Confidence came in at 46.6 vs 49.0 consensus, down from 49.3 in June. The decline was aggravated by a worsening job market, as the percentage of consumers claiming jobs are hard to get rose sharply. According to ABC's poll, consumer confidence registered at -47, up from last week's -50 and breaking the -50 threshold for the first time since mid-June. Twenty-six percent of Americans say it's a good time to buy things, up from 22% last week, while 44% rate their personal finances positively.
• Retail sales. Chain store sales fell 1.6% in the first three weeks of July, Redbook said, worse than the -0.9% expected. According to ICSC, weekly sales were up 1%, but July sales will be off around 5.5% Y/Y with "leaner clearance than last year hurting the reported sales pace."

Earnings: Wednesday Before Open

• American Tower (AMT): Q2 EPS of $0.14 misses by $0.03. Revenue of $423M (+7.5%) vs. $414M. (PR)
• ArcelorMittal (MT): Q2 net loss of $792M ($0.57/share) vs. +$5.84B a year ago and vs. consensus of +$336M. Sales of $15.2B (-60%). Sees Q3 Ebitda of $1.4-1.8B. Says it achieved annualized fixed-cost cuts of $8.4B by the end of Q2. Shares -4.2% in Amsterdam. (Bloomberg)
• Arrow Electronics (ARW): Q2 EPS of $0.31 beats by $0.02. Revenue of $3.4B (-22%) in-line. (PR)
• Brookfield Properties (BPO): Q2 FFO of $0.38 beats by $0.03. Revenue of $619M (-13.5%) vs. $527M. (PR)
• Coca-Cola Enterprises (CCE): Q2 EPS of $0.67 beats by $0.16. Revenue of $5.9B (-0.4%) vs. $6B. Issues upside EPS guidance for FY '09 of $1.44-1.49 vs. $1.33 consensus. Shares +5.9% premarket (8:00 ET). (PR)
• EQT Corp. (EQT): Q2 EPS of $0.20 misses by $0.03. Revenue of $238M (-29%) vs. $236M. (PR)
• General Dynamics (GD): Q2 EPS of $1.61 beats by $0.04. Revenue of $8.1B (+11%) in-line. Shares +2% premarket (8:00 ET). (PR)
• Hecla Mining (HL): Q2 EPS of $0.00 beats by $0.02. Revenue of $75M (+10.5%) vs. $53M. Shares +2% premarket (8:20 ET). (PR)
• Hess (HES): Q2 EPS of $0.31 beats by $0.30. Revenue of $6.8B (-42%) vs. $7.4B. Shares +1.6% premarket (8:00 ET).(PR)
• Honda (HMC): FQ1 net profit fell 96% to ¥7.56B ($79.9M), vs. consensus of -¥56.4B, and vs. a FQ4 net loss of ¥186.1B. Sees full-year earnings of ¥55B, down 60% from last year, but 38% higher than its previous outlook of ¥40B. Revenue of ¥2T (-30%). (WSJ)
• Hospira (HSP): Q2 EPS of $0.73 beats by $0.13. Revenue of $957M (+6.1%) vs. $878M. (PR)
• IAC/InterActiveCorp (IACI): Q2 EPS of $0.02 misses by $0.07. Revenue of $340M (-4%) vs. $335M. Shares +0.5% premarket (8:10 ET). (PR)
• Jones Apparel Group (JNY): Q2 EPS of $0.29 beats by $0.22. Revenue of $804M (-3%) vs. $777M. Shares +9.5% premarket (8:10 ET). (PR)
• MeadWestvaco (MWV): Q2 EPS of $0.22 vs. consensus of $0.01 (may not be comparable). Revenue of $1.4B (-16%) vs. $1.5B. (PR)
• Medco Health Solutions (MHS): Q2 EPS of $0.69 beats by $0.04. Revenue of $14.9B (+17%) vs. $14.5B. (PR)
• Moody's (MCO): Q2 EPS of $0.43 beats by $0.03. Revenue of $451M (-7.6%) vs. $427M. (PR)
• New York Community Bancorp (NYB): Q2 EPS of $0.16 vs. consensus of $0.25 (may not be comparable). Non-performing assets of $341.6M at the end of June, representing 1.04% of total assets, vs. $176.8M, or 0.55% of total assets, at the end of March. (PR)
• Nissan (NSANY): FQ1 net loss of ¥16.5B vs. a net profit of ¥52.8B a year ago, and vs. consensus of -¥108.5B. Last quarter Nissan posted a ¥276.9B loss. Sales of ¥1.51T (-36%). Still sees full-year loss of ¥170B. Sources say Nissan will announce today a new China plant capable of producing 240,000 vehicles/year. (WSJ)
• Penske Automotive Group (PAG): Q2 EPS of $0.22 beats by $0.07. Revenue of $2.3B (-30%) vs. $2.4B. (PR)
• Praxair (PX): Q2 EPS of $0.96 misses by $0.03. Revenue of $2.3B (-26%) vs. $2.1B. (PR)
• Qwest Communications International (Q): Q2 EPS of $0.13 beats by $0.03. Revenue of $3.1B (-9%) in-line. (PR)
• SAP AG (SAP): Q2 net profit of €423M vs. €408M a year ago and consensus of €385M. Revenue of €2.58B (-10%) vs. €2.64B. Software revenue of €543M (-40%) vs. consensus of €556M. Operating margin 27.7%. Sees full-year operating margin of 25.5-27%, up from previous guidance of 24.5-25.5%. Shares +1.8% in Frankfurt. (DJ)
• Sealed Air (SEE): Q2 EPS of $0.34 in-line. Revenue of $1B (-20%) vs. $1.1B. (PR)
• Scotts Miracle-Gro Company (SMG): FQ3 EPS of $2.32 beats by $0.07. Revenue of $1.3B (+9%) in-line. (PR)
• Sprint Nextel (S): Q2 EPS of -$0.13 misses by $0.11. Revenue of $8.1B (-10%) in-line. (PR)
• Wyndham (WYN): Q2 EPS of $0.41 beats by $0.04. Revenue of $920M (-19%) vs. $917M. Issues downside Q3 EPS guidance of $0.53-0.57 vs. $0.58 consensus. Issues in-line guidance for FY '09, sees FY '09 revenue of $3.5-3.9B vs. $3.6B consensus.

Earnings: Tuesday After Close

• American Financial Group (AFG): Q2 EPS of $1.09 beats by $0.16. Revenue of $1.1B (+8%) vs. $815M. (PR)
• Brandywine Realty Trust (BDN): Q2 FFO of $0.56 beats by $0.10. Revenue of $146M (-3%) in-line. Raises full-year FFO to $1.75-1.80 from $1.60-$1.74, vs. $1.71. (PR)
• Carter's (CRI): Q2 EPS of $0.23 beats by $0.17. Revenue of $318M (+5%) vs. $300M. Sees Q3 EPS growth in mid to high single digits. (PR)
• Chicago Bridge & Iron (CBI): Q2 EPS of $0.45 beats by $0.05. Revenue of $1.2B (-14%) in-line. (PR)
• Dreamworks Animation SKG (DWA): Q2 EPS of $0.30 beats by $0.14. Revenue of $132M (-7%) vs. $117M. (PR)
• Fidelity National Information Services (FIS): Q2 EPS of $0.42 beats by $0.06. Revenue of $835M (-4%) vs. $832M. Raises full-year EPS view to $1.71-1.75 vs. $1.62. (PR)
• FMC Technologies (FTI): Q2 EPS of $0.84 beats by $0.23. Revenue of $1.1B (-6%) in-line. Sees full-year EPS of $2.55-2.65 vs. $2.36. (PR)
• Hertz Global Holdings (HTZ): Q2 EPS of $0.12 beats by $0.06. Revenue of $1.8B (-23%) in-line. (PR)
• Integrated Device Technology (IDTI): FQ1 EPS of $0.02 beats by $0.02. Revenue of $116M (-38%) vs. $113M. (PR)
• Life Technologies (LIFE): Q2 EPS of $0.79 beats by $0.13. Revenue of $833M (+126%) vs. $803M. Sees full-year EPS of $2.70-2.80 vs. $2.63. (PR)
• Massey Energy Company (MEE): Q2 EPS of $0.24 beats by $0.08. Revenue of $698M (-16%) vs. $661M. (PR)
• McKesson (MCK): FQ1 EPS of $1.06 beats by $0.20. Revenue of $27B (flat) in-line. (PR)
• Nalco Company (NLC): Q2 EPS of $0.11 misses by $0.13. Revenue of $913M (-14%) vs. $950M. (PR)
• Norfolk Southern (NSC): Q2 EPS of $0.66 beats by $0.02. Revenue of $1.9B (-33%) vs. $2.1B. (PR)
• Panera Bread Company (PNRA): Q2 EPS of $0.65 beats by $0.01. Revenue of $331M (+3%) in-line. Company targets 15-20 new unit openings in Q3. (PR)
• Parametric Technology (PMTC): FQ3 EPS of $0.03 misses by $0.13. Revenue of $226M (-17%) vs. $223M. Sees Q4 EPS of $0.25-0.30 vs. $0.31. (PR)
• Psychiatric Solutions (PSYS): Q2 EPS of $0.63 beats by $0.07. Revenue of $471M (+6%) vs. $469M. Reaffirms full-year EPS of $2.24-$2.32 vs. $2.23. (PR)
• Questar (STR): Q2 EPS of $0.54 in-line. Revenue of $613M (-26%) vs. $525M. (PR)
• SBA Communications (SBAC): Q2 EPS of $0.25 beats by $0.42. Revenue of $136M (+22%) vs. $137M. (PR)
• STMicroelectronics (STM): Q2 EPS of -$0.36 misses by $0.04. Revenue of $2B (-16%) vs. $1.8B. Sees Q3 revenue of $2.07B-2.27B vs. $2.02B. (PR)
• Superior Energy Services (SPN): Q2 EPS of $0.35 misses by $0.09. Revenue of $361M (-21%) vs. $392M. (PR)
• TECO Energy (TE): Q2 EPS of $0.29 beats by $0.04. Revenue of $825M (-7%) vs. $864M. (PR)
• THQ (THQI): FQ1 EPS of $0.10 beats by $0.18. Revenue of $244M (+77%) vs. $203M. Sees Q2 revenue of $85M-95M vs. $123M. (PR)
• Total System Services (TSS): Q2 EPS of $0.27 in-line. Revenue of $415M (-4%) vs. $401M. Sees full-year decline in revenues of 3-5% and in net income of 11-13%. (PR)
• Trimble Navigation (TRMB): Q2 EPS of $0.31 misses by $0.01. Revenue of $290M (-23%) vs. $300M. Sees Q3 EPS of $0.25 vs. $0.27. (PR)
• Western Digital (WDC): FQ4 EPS of $0.76 beats by $0.48. Revenue of $1.9B (-5%) vs. $1.6B. (PR)
• XL Capital (XL): Q2 EPS of $0.96 beats by $0.34. Revenue of $1.73B (-19%) vs. $1.71B. (PR)

Today's Markets

Asian markets were broadly down, but Europe is off to a strong start. U.S. futures have dipped into negative territory.

We love tracking David Einhorn because straight up, he's a smart guy. Besides dominating hedge fund land, Einhorn also dabbles in poker and the picture to the right is of him at the World Series of Poker, where he has in the past donated his winnings to charity. We love reading his investor letters at Greenlight Capital because they often give so much insight and transparency as to some of the movements they are making with their portfolios. And, in his second quarter investor letter, Einhorn reveals a few major new developments at his hedge fund.

While Einhorn is typically a value/event-driven investor, we instead want to turn the focus to his macro plays. First and foremost, the activity most people will talk about is the fact that Greenlight has shifted their gold position from the gold trust exchange traded fund GLD to physical gold, citing cheaper fees for storage than expense ratios for the fund they were previously invested in. This is an intriguing move and we'd imagine other funds will eventually follow suit. After all, literally a ton of hedge funds are invested in GLD. And, most notably, John Paulson's hedge fund Paulson & Co has billions of dollars tied up in a GLD position. It will be interesting to see if other funds shift toward storing physical gold ala Einhorn. And for those of you wondering where gold is headed, check out the video we posted up yesterday regarding gold's current trading range.