Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:52 AM EST
S&P 500: +0.00; 1,423.40
NASDAQ 100: +2.75; 1,795.00
Dow: -8.00; 12,377.00
NIKKEI 225: 17,163.20; 03/20
HANG SENG: +0.82%; 19,516.41 (+159.51)
S&P/ASX 200: -0.25%; 5,861.90 (-14.70)
BSE SENSEX 30: +1.89%;12,945.88 (+239.94)
FTSE 100: +0.45%; 6,248.30 (+28.00)
CAC 40: +0.08%; 5,507.80 (+4.53)
XETRA-DAX: +0.20%; 6,713.76 (+13.47)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.96%; $59.82 (+$0.57)
Gold: +0.39%; $661.60 (+$2.60)
Natural Gas: +0.77%; $6.96 (+$0.05)
Silver: +0.30%; $13.41 (+$0.04)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
FedEx Suffers First Income Drop in Three Years, Sees Weakness Ahead
FedEx Corp., the world's #1 air shipper, said this morning its FQ3 2007 net income fell 2%, from $428 million to $422 million, its first quarterly drop in three years. EPS was down from $1.38 to $1.35, slightly lower than analyst consensus estimates of $1.37 a share, but at the high-end of FedEx's Dec. 20 profit forecast of $1.20-1.35. Revenue rose 7% to $8.59 billion, missing analyst estimates of $8.7 billion. FedEx said its Q3 results were impacted by "a slowing economic environment, lower fuel surcharges and severe winter storms." Earnings also include an $0.08 benefit from a reduction in the company's tax rate. Operating margin dropped from 8.9% to 7.5%. Total package volume was up 4% annualized y/y. FedEx gave Q4 guidance of $1.93-2.08, and $6.45-6.60 on the year, but warned that 2008 growth may come in below-target due to a slower economy and planned investments. Long-term, it reiterated its goal of 10-15% EPS growth annually. Broken down by unit, FedEx Express income was down 12% to $391m, FedEx Ground was up 5% to $196m, FedEx Freight was down 32% to $50m, and Kinko's was down 43% to $4m. Noting slower economic growth in the U.S., CEO Frederick W. Smith said, "I believe, however, this represents a healthy transition for the economy as it phases into a more sustainable growth rate." Shares are down 2.8% to $109.10 in pre-market trading as of 8:15 ET.
Sources: Press Release, Bloomberg, MarketWatch
Commentary: FedEx, Morgan Stanley Preview: A Look At Past Performance On Earnings Days • Earnings Preview: Oracle, FedEx Could Sway Market; General Mills Should Beat Expectations • FedEx May Not Be Out of Trouble Yet
Stocks/ETFs to watch: FedEx Corp. (NYSE:FDX). Competitors: United Parcel Service (NYSE:UPS), TNT N.V. (TNT), EGL Inc. (NASDAQ:EAGL)
Morgan Stanley Tops EPS and Revenue Estimates By a Wide Margin; Shares Surge
In another sign profits at the major investment banks were unaffected by subprime woes, Morgan Stanley reported this morning that its first-quarter profit rose 70% on trading gains and a jump in investment-banking fees. By the numbers, net income surged 70%, including a $109 million divestiture gain from the sale of Quilter Holdings. Profit came in at $2.67 billion, good for EPS of $2.51, versus $1.57 billion (EPS of $1.48) in the year earlier period. Revenue increased 29% YoY to $11 billion. Sans one-time gains, EPS was still $2.40 a share. Thomson Financial consensus estimates projected EPS of $1.88 on revenue of $9.42 billion. Steve Roukis, analyst at Matrix Asset Advisors, viewed Morgan's results as proof "the industry's healthy." According to CEO and Chairman John Mack, "This strong performance was in large part the result of effective, disciplined risk-taking by our team in Institutional Securities." Shares are higher by $2.24, or 2.94%, to $78.35 in pre-market action.
Sources: Press Release, Bloomberg, Wall Street Journal, TheStreet.com
Commentary: FedEx, Morgan Stanley Preview: A Look At Past Performance On Earnings Days • Morgan Stanley to Open First Vietnam I-Bank • Major I-Banks Near 'Junk' Status -- Bloomberg
Stocks/ETFs to watch: Morgan Stanley (NYSE:MS). Competitors: Goldman Sachs (NYSE:GS), Bear Stearns (NYSE:BSC), Merrill Lynch (MER), Morgan Stanley (MS), Lehman Brothers (LEH). ETFs: iShares Dow Jones US Broker-Dealers Ind. (NYSEARCA:IAI), Vanguard Financials (NYSEARCA:VFH), Financial Select Sector SPDR (NYSEARCA:XLF), iShares Dow Jones US Financial Svc. (NYSEARCA:IYG)
Delta Downs and Youbet Sign Co-promotion Agreement
Delta Downs Racetrack and Casino in Louisiana (a subsidiary of Boyd Gaming) and Youbet.com, an online wagering company focused on horse racing, signed a co-promotion agreement yesterday that sent Boyd's shares 5.7% higher to $47.15, but left Youbet's down 0.4% to $2.53. Youbet will provide online advance deposit wagering and other services for Delta Downs, while Delta will promote Youbet at its racetrack and casino and in media advertising. Delta Downs' GM commented, "Delta Downs' racing product has experienced tremendous growth in recent years, and with the help of Youbet we expect that trend to continue well into the future." In a press release, Youbet said it has nearly 200,000 customers who wagered more than $463 million last year.
Sources: Press release [pdf], Associated Press
Commentary: Boyd Gaming: Q4 Earnings Beat Despite Sales Decline • Hands Off Boyd • A Closer Look at Casino Stocks
Stocks/ETFs to watch: Boyd Gaming (NYSE:BYD), Youbet.com (UBET). Competitors: Magna Entertainment (MECA), Harrah's Entertainment (HET), MGM Mirage (NYSE:MGM), Station Casinos (NYSE:STN)
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Asian Headlines (via Bloomberg.com)
• Asian Stocks Rise for Fifth Day; Rinker Advances on U.S. Housing Report Asian stocks rose for a fifth day, set for this month's best close.
• Li & Fung Second-Half Profit Rises 23 Percent as Acquisitions Boost Sales Li & Fung Ltd., which sells goods to Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE:TGT), posted a 23 percent surge in second-half profit after the Hong Kong trader bought more companies to boost sales.
• Wharf's 2006 Underlying Profit Falls 5 Percent on Taxes, Borrowing Costs Wharf (Holdings) Ltd., which owns real estate and ports in Hong Kong, said underlying profit fell 5 percent in 2006 because borrowing costs increased and decline in profit from its port and media businesses.
• Shenzhen Bank's 2006 Profit Quadruples on Higher Margins, Lower Bad Loans Shenzhen Development Bank Co., controlled by buyout firm Newbridge Capital LLC., said full-year profit quadrupled as it increased margins and reduced bad-debt provisions.
European Headlines (via Bloomberg.com)
• European Stocks Advance on Takeover Outlook; British Airways, Technip Rise European stocks rose for a fifth day on speculation mergers and acquisitions will increase. British Airways Plc (NYSEARCA:BAB), Hammerson Plc and Technip SA (TKP) gained as investors bet they will be takeover targets.
• Bank of England Voted 8-1 for Unchanged Rate; Blanchflower Backed a Cut Bank of England policy makers voted 8-1 to keep its benchmark rate at a five-year high of 5.25 percent this month. David Blanchflower unexpectedly made the first call for a rate cut since May.
• Metro Forecasts Slower Profit Growth After Earnings Triple; Shares Decline Metro AG, Germany's largest retailer, said profit growth will slow in 2007 because of an increase in sales tax and the purchase of stores from Wal-Mart Stores Inc.
• Bertelsmann Net More Than Doubles on Music-Publishing Sale, Acquisitions Bertelsmann AG, Europe's largest media company, said profit more than doubled last year following the disposal of a music publishing division and as acquisitions spurred growth in the book, DVD and magazine segments.