Thursday, December 17, 2009

Morning Call: December 17, 2009

December 17, 2009: Morning Call

Fair Value: SP500 – 1104.20; NDX: 1799.22; DOW: 10378.63

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044, 1067-1075 support/ 1110, 1133 resistance

5-Day Event Outlook:

Today: Ireland Q3 GDP, Initial Jobless Claims, Leading Indicators, Philly Fed, Bernanke confirmation vote in Senate Banking Committee, RIMM earnings

Friday: German IFO Business Climate, BOE Lending report.

Next Monday: BOJ Monthly Report, Hong Kong CPI, US Chicago Fed National Activity Index.

Next Tuesday: Q3 UK GDP revision, US Q3 GDP revision, Personal Consumption, Richmond Fed Manufacturing Index, House Price Index, Existing Home Sales

Detailed Daily Calendar of Events:

Pre-market EPS: DFS (.10/1.7B); FDX (1.04/8.45B)
4:30: BOE Releases Quarterly Inflation Attitudes Survey
05:00: Euro-zone Construction Output
06:00: Irish GDP (Q3):
08:30: Initial Jobless Claims (Dec 12): prior 474,000
10:00: US Leading Indicators (Nov): 0.7%
10:00: US Philly Fed (Dec): 15.8
10:00: Bernanke Confirmation Vote held in Senate Banking Committee
10:30: EIA Natural Gas Storage Change
11:00: DFS earnings call
13:00: JAVA Annual General Meeting
17:00: RIMM earnings call
17:00: NKE earnings call
Post-market EPS: NKE (.71/4.3B); ORCL (.36/5.68B); PALM (-.32/265.6M); RIMM(1.04/3.79B)

Foreign Market Summary/Key Macro News/Commentary:

The story of the morning is the continued sharp decline in the Euro, which is tumbling to 3-month lows against the dollar (1.4364). Standard and Poors downgraded their sovereign debt rating of Greece to BBB+ yesterday afternoon. The Euro barely budged on the S&P headline when it hit yesterday at 12:23pm ET. Once Asian markets began opening last night the Euro started getting hit hard as traders scrambled to unwind carry trades. Also, The sell-off appears driven in part by technical factors. 1.425-1.43 is a key level of support and a breach of these levels would likely have more substantial spillover effects in commodity and equity markets. A break of that level could rattle confidence and may suggest a disorderly unwind of the dollar carry trade (One of the preferred long assets in the short dollar carry trade is the Euro). At this point, the pace of the Euro decline is more problematic than the magnitude of the decline. Traders will begin worrying about the magnitude of the decline if the Euro support areas discussed above do not hold. The equity market reaction is fairly muted and remains incredibly resilient with the S&P futures 5 below fair value (significant short dollar/long ES1 correlation breakdown). Gold, though, is down 16 to 1122 and just above the relative lows and 50 day SMA at 1111. European markets are down 0.50% to 0.80% following weaker than expected UK retail sales and concerns about potential spillover effects from the Greece debt crisis. The S&P debt downgrade obviously reflects market skepticism regarding Greece's willingness to enact austerity measures. Greek labor unions are opposed to the austerity measures and plan a nationwide strike today. Thus far, the problems appear contained to Greece as other high-deficit countries across the region have avoided the substantial widening of credit spreads that Greece has seen because market participants appear more confident that those countries have better economic prospects or will be more disciplined on fiscal restraint. Asian markets declined (Japan down 0.13%, Hong Kong down 1.22%, Australia up 0.18%, Shanghai down 2.2%, South Korea down 1.1%, India down 0.11%). South Korea slipped as institutional investors dumped large-caps on economic uncertainty. Hong Kong was hit when its central bank said the city risked “sharp corrections” in asset prices.

Research Calls/Market Moving News:

GS (164.99); MS (30.34): Goldman Sachs (GS) and Morgan Stanley (MS) estimates reduced at Meredith Whitney Advisory Group-- CNBC, Bloomberg:
· GS
o f09 to $19.57 from $19.95; Reuters is $19.12; First Call $19.29
o f10 to $19.65 from $21.73; Reuters is $18.22; First Call $18.78
o f11 to $20.60 from $24.04
· MS
o f10 reduced to $2.60 from $2.63; Reuters is $3.32
o f11 reduced to $2.75 from $3.28

BAC (15.28): Bank of America initiated buy at UBS -- wires

BAC (15.28): Bank of America names Brian Moynihan president/CEO: Moynihan, who will assume his new post upon the 31-Dec retirement of Kenneth Lewis, is currently the bank's president of Consumer and Small Business Banking.

C (3.15): Citi confirms that it priced 5.4B common shares at $3.15 per share. US Treasury has decided not to sell any Citi shares along side Citi offering: Reuters reports that the Treasury has agreed to a lock-up prohibiting sales of any of its shares of C for 90 days, according to a source

FSLR (136.74): First Solar guides f10 EPS $6.05-$6.85 vs Reuters $6.60; sales $2.7-$2.9B vs Reuters $2.41B: The company also says it plans to invest $365M of capital to add two production plants, consisting of four manufacturing lines each, and the expansion is expected to increase the company’s annual capacity by 424 megawatts (MW), assuming Q3 2009 reported annual line run rate of 53 MW. Additionally, with the announced expansion in Malaysia and the previously announced two-line factory in France, First Solar expects to add 10 production lines during 2010 and 2011, increasing capacity by over 48% from current levels, bringing First Solar’s annual or announced production capacity to approximately.

PNC (52.00): PNC Bank initiated overweight at JPMorgan: Target is $70.

FDX (89.95): FedEx reports Q2 EPS $1.10 vs Reuters $1.10: First Call is $1.06. Company reports revenues of $8.60B vs Reuters $8.51B. Guides Q3 EPS to $0.50-$0.70 vs Reuters $0.85. Guides full year EPS to $3.45-$3.75 vs Reuters $3.61.

Friday, December 11, 2009

December 11, 2009: Morning Call

December 11, 2009: Morning Call

Fair Value: SP500 – 1097.34; NDX: 1797.91; DOW: 10343.49

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044, 1067-1075 support/ 1110, 1133 resistance

5-Day Event Outlook:

Today: US Retail Sales, University of Michigan Confidence, and US Import Price Index

Next Monday: Hong Kong Industrial Production, Euro-zone Employment, Euro-zone Industrial Production

Next Tuesday: French CPI, UK CPI, German ZEW Economic Sentiment, Credit Card Companies release November Master Trust Data, US PPI, US Net TIC Flows, US Industrial Production, US Capacity Utilization

Next Wednesday: German PMI Manufacturing/Services, Euro-zone PMI Manufacturing/Services, UK Jobless Claims, UK Unemployment Rate, Euro-zone CPI, US CPI, US Housing Starts, FOMC Rate Decision

Next Thursday: Ireland Q3 GDP, Initial Jobless Claims, Leading Indicators, Philly Fed, Bernanke confirmation vote in Senate Banking Committee, RIMM earnings

Detailed Daily Calendar of Events:

08:30: US Import Price Index (Nov): 1.2% MoM; 2.9% YoY
08:30: US Retail Sales (Nov): 0.6%; Less Autos: 0.4%; Less Autos/Gas: 0.5%
10:00: House oversight panel will convene a hearing entitled “Bank of America and Merrill Lynch: How Did a Private Deal Turn Into a Federal Bailout?
10:00: University of Michigan Confidence (Dec): 68.3
10:00: Business Inventories (Oct): -0.2%

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 6 points above fair value and the NASDAQ futures are trading 10 points above fair value at 8am ET. Chinese Industrial Production came in stronger than expected (19.2% vs. 18.2%). New loans also topped forecasts (290.8B vs. 250B estimate) as the government continues to encourage banks to aggressively extend credit. Retail sales were short of expectations (15.8% vs. 16.5% estimate) but the better industrial production number appears to be trumping the weaker retail sales in early trading. Asian markets mostly rose on the Chinese data (Japan up 2.4%, Hong Kong up 0.90%, Australia up 0.62%, Shanghai down .06%, India down 0.41%). Chinese developers rebounded in Hong Kong after having been sold off yesterday, and Chinese banks broke a losing streak on news that lending grew m/m, when a decline had been expected. India erased early gains when it was revealed that October industrial output went up by less than expected. Declines were led by Bharti Airtel (BHARTI.IN), ICICI Bank (ICICIBC.IN), and ITC (ITC.IN). European markets are up 0.80% to 1.0%. Best performing sectors include Basic Resources and Chemicals, weakest are Banks and Healthcare. Moodys have said they have no current plans to lower their top debt ratings on the US and UK after a report earlier in the week said the sovereigns "may test the AAA boundaries.

Research Calls/Market Moving News:

BAC (15.21): Bank of New York Mellon (BK) CEO Robert Kelly back in mix as candidate to become Bank of America CEO – WSJ: People familiar with the matter say Kelly told BK directors this week that he is talking with BAC. His candidacy re-emerged after BAC got approval to repay its TARP funds, thus freeing it from pay restrictions and federal scrutiny. People familiar with the process say internal candidates Gregory Curl and Brian Moynihan are still being considered, and an announcement could be made next week.

AAPL (196.43); GOOG (591.50): Apple (AAPL), Google (GOOG) going mano a mano to buy Silicon Valley start-ups – WSJ: People familiar with the matters say Google was in serious discussions to buy Lala Media before Apple won it last week, and Apple chased AdMob before Google agreed to buy it in November. The overlapping hunts indicate that the titans plan to expand into each other's strengths, in contrast with their years of having had separate business fields. Recall the companies now compete in mobile phones, with the introduction of Google's Android system. People familiar with the matters say Google is talking to handset manufacturers about raising the prominence of Google branding on its phones, and Apple would like to buy iPhone technologies that it does not currently have.

UTX (67.93): United Technologies provides guidance: The company also guides f09 EPS to $4.10, which represents the midpoint of the company's $4.00-$4.20 range, as well as f09 revenues of $53B. Reuters consensus is $4.10 and $52.72B. First Call is $4.11 for f09. United Technologies guides f10 EPS to range $4.40-$4.65: F10 revenues guided to $54-$55B. Reuters consensus is $4.52 and $53.29B, respectively. First Call is $4.53 for f10 EPS. The slides are associated with UTX's analyst meeting.

C (3.87): Citigroup's TARP payback could cheer institutional investors – WSJ: WSJ reports the government's expected exit from Citigroup could trigger the re-entry of institutional investors like mutual and pension funds. Institutional ownership in Citi is roughly 20%, the bank calculates. That makes Citigroup "one of the least owned banks" by institutional investors such as mutual funds and pension funds, J.P. Morgan Chase analyst Vivek Juneja wrote in a research report. Normally, institutions hold 70% or more of large companies' shares. David Trone, an analyst with Macquarie Capital, whose co's customers are institutional investors, says, "A lot of clients I talk to are afraid" of the government ownership. Should those investors lose their fear -- and should index funds, for technical reasons, start buying more Citigroup stock -- the shares could rise, offsetting downward pressure of the dilution expected when Citigroup issues some large amount of stock as part of its exit from the government's Troubled Asset Relief Plan investment. Some hedge funds appear to have positioned themselves long in Citigroup's common stock to benefit.

Sales lull has retailers worried – WSJ: WSJ reports who will blink first: retailers or shoppers? Chain-stores are holding bigger markdowns in reserve trying to gauge how long shoppers will wait for better deals to emerge. The standoff, which experts say could be decided in favor of shoppers as soon as this weekend, could help determine whether or not this holiday season marks the second year in a row of sales declines. Nine of 10 people waiting to finish their holiday shopping are doing so to get discounts of at least 50%, according to a survey released Thursday by UBS and market researcher America's Research Group. A third of respondents said they are holding out for a 70% discount. Retailers are reluctant to hit the panic button. So far, they have avoided drastic price cuts by hewing to carefully planned promotions and limiting inventories. But if shoppers aren't out in force this weekend, many mall-based clothing retailers have arranged contingency plans for additional sales and markdowns.

China's curbs on tech purchases draw ire – WSJ: WSJ reports China has rolled out regulations that could curb billions of dollars worth of sales of high-tech gear to government agencies, raising cries from companies across the globe and from the U.S. government. More than 30 industry groups from North America, Europe and Asia -- representing most of the world's major technology companies -- sent a letter Thursday to Chinese ministries saying they were "deeply troubled" by a new Chinese rule they say discriminates against their products. The companies were responding to a notice the Chinese government posted on a Web site in late October, but didn't immediately publicize, requiring vendors to gain accreditation for their products before they can be included in a government procurement catalog of products containing "indigenous innovation." Companies that aren't listed in the catalog will theoretically be allowed to sell products to government agencies. But preference will apparently go to those listed.

Friday, November 20, 2009

Morning Call: November 20, 2009

November 20, 2009: Morning Call

Fair Value: SP500 – 1093.48; NDX: 1772.72; DOW: 10314.84

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/ 1110 resistance

5-Day Outlook:
Today: ANN and DHI report earnings.

Next Monday: French, German, and Euro-zone PMI Manufacturing data, US Existing Home Sales.

Next Tuesday: German GDP, US GDP Revision, S&P CaseShiller Home Price Index, US Consumer Confidence, Richmond Fed Manufacturing Index

Next Wednesday: UK GDP, US Personal Income/Spending, US Durable Goods, US Initial Jobless Claims, University of Michigan Confidence, US New Home Sales

Next Thursday: Thanksgiving Holiday- Markets Closed.

Notable Earnings: Monday Pre-Market: BJS, CPB, LDK. Monday Post-Market: HPQ, BRCD. Tuesday Pre-market: AEO, HNZ. Tuesday Post-Market: JCG

Detailed Daily Calendar of Events:

Pre-market EPS: ANN (.06/475.9M); DHI (-.25/1.15B); SJM (1.04/1.24B)
10:00: DHI earnings call

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 9 points below fair value and the NASDAQ futures are trading 13 points below fair value at 7:45am ET. There are a few developments that have contributed to sell-off in the futures market over the last 2 hours. European markets reversed modest gains on the open and are down 1% led by financial and basic material stocks after ECB President Trichet said the ECB would begin to absorb liquidity to ensure price stability and that banks must strengthen their balance sheets. Zhang Ping, chairman of the Chinese National Development and Reform Commission, said at 7am ET that domestic demand growth is not strong enough and that China's economic recovery is not solid. Also, said that China still has an industrial overcapacity problem. Zhang says China's external and domestic situation is complicated. There are also rumors circulating that Ukraine is on the verge of defaulting on their sovereign debt - this Ukraine news story is weighing on the Euro, which is trading down 0.75% against the dollar, right at the short-term uptrend line at 1.48. Gold is trading down 10 to 1134 and other commodities are down 1% to 1.25%. Asian markets closed mostly lower as DELL's disappointing results weighted on technology shares and resource stocks fell on lower commodity prices (Japan down 0.54%-4th down day in a row; Hong Kong down 0.83%, Australia down 1.33%, Shanghai down 0.31%, India up 1.4%). India reversed early declines led by banking and technology shares as traders moved to cover short positions. South Korea was flat as chipmakers weighed on the market. Gainers outnumbered losers in China, but the market still turned down by the end of the day on concerns about the country’s monetary policy.

Research Calls/Market Moving News:

DELL (15.87): Dell reports Q3 EPS $0.23 ex-items vs Reuters $0.28Company reports revenues of $12.90B vs Reuters $13.20B. For Q4, Dell expects seasonal demand improvement in its Consumer business, while demand in Public is typically lower during the quarter. The company expects Q4 revenue to improve over Q3; Reuters consensus is $13.58B. DELL shares are trading down 6.7% in the pre-market.

Fed Makes Monitoring Capital Foremost Concern Amid Bubble Talk- Bloomberg: -- “Federal Reserve officials are stepping up scrutiny of the biggest U.S. banks to ensure the lenders can withstand a reversal of soaring global-asset prices, according to people with knowledge of the matter. Supervisors are examining whether banks such as JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. have enough capital for the risks they take, how much they know about the strength of their counterparties and whether risk managers have authority to influence bank practices and policies. Lawmakers led by Senator Christopher Dodd have criticized the Fed for failing to prevent a decline in lending standards that contributed to the credit crisis. The central bank’s monitoring takes on renewed urgency as Chairman Ben S. Bernanke’s pledge to keep the benchmark interest rate near zero for “an extended period” is helping to fuel a surge in assets. The MSCI AC World stock index is up 71 percent since hitting a recession low on March 9. Gold reached an all-time high of $1,145.50 an ounce Nov. 18. The policy is raising the “systemic risk” of new asset bubbles, Bill Gross, who runs the world’s largest bond fund at Pacific Investment Management Co., said in a note posted on the Newport Beach, California-based company’s Web site yesterday. Finance officials in Asia say a bubble fueled by the Fed’s low rates has already arrived.”

RIMM (58.84): Research In Motion downgraded to neutral from buy at FTN Equity :Firm notes a decline in market share due to greater than expected competitive pressure.

GPS (21.84): Gap reports Q3 EPS $0.44 vs guidance $0.42-0.44 vs Reuters $0.44: Company previously reported revenues of $3.59B. Gross margin increased 380 basis points to 42.5%; operating margin increased to 13.9% compared with 11.1% last year. inventory per square foot was down 9% y/y. GPS shares are trading up 1.6%.

Treasury announces plans to sell warrants from JPM, COF, TCB in modified Dutch auctions: The auctions will be held during the next month. The warrants were obtained from the companies as part of the TARP program.

Dallas Fed President Fisher comments on too big to fail problem - wires: Fisher says that it is unrealistic to expect the government not to help systemically important firms get "out of the fire". But Fisher added that banks that are considered too big to fail might need to divest some businesses such as proprietary trading.

GS (172.83): Some of Goldman Sachs' largest investors say more profits should go to shareholders reports the WSJ: Sources familiar with the situation say that some of the firm's largest shareholders are saying the firm should reduce its bonus pool and pass along more of the earnings to shareholders. Shareholders point to expectations that the record net income and compensation that will result in EPS about 22% lower than '07 because of the 100M shares issued in the past year as the bank sought to bolster its financial position and capital. The shareholders say reigning in the bonus pool would give a boost to EPS and the share price. Some investors point to the change in the financials that now includes consultants and temp workers in the total worker count so that total pay per worker appears lower.

Wednesday, November 18, 2009

Morning Call: November 18, 2009

November 18, 2009: Morning Call

Fair Value: SP500 – 1108.72; NDX: 1811.79; DOW: 10416.35

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/ 1110 resistance

5-Day Outlook:
Today: BOE Meeting Minutes, Euro-zone Construction Output, US CPI, US Housing Starts.

Thursday: UK Retail Sales, US Initial Jobless Claims, US Leading Indicators, US Philly Fed.

Friday: ANN and DHI report earnings.

Next Monday: French, German, and Euro-zone PMI Manufacturing data, US Existing Home Sales.

Next Tuesday: German GDP, US GDP Revision, S&P CaseShiller Home Price Index, US Consumer Confidence, Richmond Fed Manufacturing Index

Notable Earnings: Tuesday Pre-market: HD, TGT. Tuesday Post-Close: CRM, ADSK. Wednesday Pre-Market: BJ, CHS, SLF. Wednesday Post-Close: NTES, LTD. Thursday Pre-market: STP, SHLD, TSL. Thursday Post-Close: DELL. Friday Pre-market: ANN, DHI

Detailed Daily Calendar of Events:

Pre-market EPS: BJ (.45/2.48B); CHS (.06/414.7M); SOLF (.15/148.3M)
08:30: US Consumer Price Index (Oct): 0.2% MoM; Ex-Food/Energy: 0.1%
08:30: US Consumer Price Index (Oct): -0.3% MoM; Ex-Food/Energy: 1.6% YoY
08:30: US Housing Starts (Oct): 598,000; Building Permits: 580,000
09:00: PHM presents at UBS Building Conference
09:15: Fed’s Bullard speaks on the economy
10:30: DOE Crude Oil and Gasoline Inventories
10:40: DVN presents at Bank of America Energy Conference
11:25: ECA presents at Bank of America Energy Conference
14:00: MSFT Analyst and Investor Meeting
15:15: HGSI presents at Lazard Capital Healthcare Conference
Post-market EPS: DCI (.34/408.7M); HOTT (.13/191.9M); JACK (.55/548.6M); LTD(-.02/1.78B); NTAP (.30/881.6M); NTES (.50/140.0M); PETM (.28/1.29B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading flat with fair value and the NASDAQ futures are trading 2 points above fair value at 7:30am ET. The Euro bounced off the uptrend line in Tuesday’s session and is trading up 0.60% against the dollar, nearing the 1.50 level once again. European markets are up 0.30% to 0.70%, as basic resource, autos, and technology stocks advance. Markets rallied from unchanged at 5:45am ET after Lloyds (unch’d), ING (+1.2%) & KBC (suspended) gained EU approval for their restructuring plans. The knee jerk higher represents relief that any uncertainty has been removed over the approval, while KBC remains suspended as we gather more detail on its disposals. Sterling dropped in early trade after the BoE mins showed one MPC member voted for and increase in QE of £40bn, whilst all but one other voted for +£25bn. The committee will reassess proceedings in Feb’10. Cadburys benefit from Hershey saying they are reviewing their options regarding the co in response to Kraft’s bid. Copper hit a 14 month high as the dollar declined, with other precious & base metals advancing. ITV +5.5% appointed a new chairman, and Wolseley drop 3.6% as profits slump. Asian markets closed mixed in a tranquil trading session (Japan down 0.55%, Hong Kong down 0.32%, Australia up 0.20%, Shanghai up 0.05%, India down 0.30%) South Korea outperformed up 1.25%. Brokerages outperformed in South Korea. Chipmakers gained on a broker report that PCs and Windows 7 will remain robust through next year. Utilities performed well in China on expectations they will see a huge increase in demand over the winter and aided by a broker upgrade of Shanghai Electric (601727.CH). Solar energy stocks rallied in Taiwan on a report that they won orders from a Chinese trade delegation. Most miners rose again in Australia, and banks were mixed. HSBC (5.HK) fell in Hong Kong after saying new capital rules may reduce credit in the economy. Weakness in real estate and financial stocks pushed Japan to reverse an early rise.

Research Calls/Market Moving News:

BAC (15.77): Paulson & Co., the hedge fund firm run by billionaire John Paulson, expects Bank of America Corp.’s stock to almost double in the next two years as writedowns abate, according to a letter sent to investors. The bank, ranked first by assets and deposits in the U.S., may rise to $29.81 by the end of December 2011, Paulson said in a quarterly letter sent to investors. Paulson expects “banks will have passed the current writedown cycle and have visibility for growth in 2012,” the letter said.

MON (77.33): Cramer Positive on Ag Sector: Featured Positive: Cramer says that agriculture is the next sector that's ready to break out to the upside, noting that the Department of Agriculture raised its spot price forecast last week citing production shortfalls. Cramer is positive on MON, POT, AGU, MOS, TNH and DE.

MON (77.33): UBS says Monsanto maintains corn yield lead: Firm's analysis of Univ of Illinois field trials indicates that MON has maintained its corn yield advantage over Pioneer in the number two corn growing state. UBS believes that a growing yield advantage plus the refuge-reduction advantages of SmartStax over Pioneer's AcreMax are likely to result in renewed MON corn share gains in 2010

CRM (65.61): reports Q3 EPS $0.16 vs Reuters $0.16: Company reports revenues of $330.5M vs Reuters $324.4M. Guides Q4 EPS to $0.14-0.15 vs Reuters $0.15; guides revenues to $340-342M vs Reuters $334.7M. Initial fiscal 2011 revenue outlook is for growth of +15-16%.

CRM (65.61): target increased to $72 from $66 at ISI Group: Analyst Heather Bellini sees company guidance as conservative and believes if the economy continues to improve, the company will beat f11 revenue guidance. The buy rating is reiterated

RIMM (61.40): Research In Motion downgraded to market perform from outperform at BMO Capital: “We are lowering estimates, price target, and our rating to MARKET PERFORM from OUTPERFORM. While we believe the November quarter is tracking to plan, we have a number of concerns that could impact FY2011 earnings and we see a number of other overhangs for the stock. We are modeling share loss at RIM's largest customer, we think the move into the mid-tier will hurt the operating model, and cash flow needs to improve. We are less concerned about a CDMA iPhone, monthly ARPU going away, and RIM's operating system and browser, but we think each represents an overhang on the stock. We don't believe that the success of the Bold 2 and new international markets will be enough to stimulate the shares.”

AAPL (207.00): China Mobile chairman says company is still in talks with Apple (AAPL) about iPhone for China – wires:

BIDU (441.50): Baidu removed from the Conviction Buy List at Goldman Sachs: Buy rating retained. Target increased to $500 from $435.

CBY (54.00); HSY (38.41); KFT (27.64): Hershey (HSY) confirms that it is considering a potential bid for Cadbury: Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming. A further announcement will be made in due course if appropriate. Ferrero confirms it is in the preliminary stages of evaluating its options with respect to Cadbury

FSLR (123.99): First Solar mentioned positively at RBC, recommends purchase into the 16-Dec guidance call: The firm recently met with the company's IR team in Texas and recommends purchase of the stock into the company's 16-Dec 2010 guidance conference call. RBC believes new plant details will be more important than 2010 ASP and margin erosion expectations, which are already baked into shares. FSLR remains sector perform rated with a $136 target.

Tuesday, November 10, 2009

November 10, 2009: Morning Call

November 10, 2009: Morning Call

Fair Value: SP500 – 1090.92; NDX: 1766.35; DOW: 10193.82

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1081, 1110 resistance

5-Day Outlook:

Today: Bank of America Financial Conference – GS, BAC, STT, COF, AXP, MS, BK among the companies presenting. RW Baird Industrial Conference (ETN, PH, CAT, SWK, ITW among the companies presenting. MON analyst day. 3 Fed officials (Lockhart, Yellon, Rosengren) speak on the US economic outlook. Tuesday night: Chinese Economic Data releases: PPI, CPI, Retail Sales, Industrial Production.

Wednesday: UK Unemployment, Bank of America Banking Conference, TOL Q4 Guidance at 2pm ET.

Thursday: Euro-zone Industrial Production, WMT earnings, Initial Jobless Claims,

Friday: Euro-zone GDP, US Trade Balance, University of Michigan Confidence, Fed’s Evans speaks on asset-price bubbles.

Monday: Euro-zone CPI, US Retail Sales, Empire Manufacturing, Business Inventories

Notable Earnings: Tuesday Pre-market: BZH. Tuesday Post-Close: AONE. Wednesday Pre-market: M. Wednesday Post-Close: AMAT. Thursday Pre-market: WMT, KSS, ECA. Thursday Post-Close: JWN, DIS. Friday Pre-market: ANF, A, JCP. Monday Pre-Market: LOW

Detailed Daily Calendar of Events:

Pre-market EPS: ARM (-.31/1.0B); BZH (-1.24/338M); JASO (.03/136M); TYC(.54/4.3B)
02:00: AEM presents at Thomas Weisel Conference
05:00: Euro-zone ZEW Economic Sentiment Survey (Nov): 58 (weaker at 51.8)
08:00: BAC presents at Bank of America banking conference
08:50: GS presents at Bank of America banking conference
09:15: Fed’s Lockhart to speak on the US Economic Outlook
10:00: Fed’s Yellon speaks on the US Economic Outlook
10:30: COF presents at Bank of America banking conference
11:15: Fed’s Rosengren speaks on the US economy
12:10: AXP presents at Bank of America banking conference
13:30: FSYS presents at Thomas Weisel conference
13:45: MS presents at Bank of America banking conference
14:30: MON Investor Meeting
14:35: BK presents at Bank of America banking conference
14:55: CAT presents at Robert Baird Conference
16:15: NYX presents at Bank of America banking conference
16:30: API Crude Oil and Gasoline Inventories
16:30: TSO Analyst and Investor Conference
17:00: ABC Consumer Confidence
19:30: Fed’s Fisher speaks on the US economic outlook
21:00: Chinese Producer Price Index (Oct): -5.2% YoY
21:00: Chinese Consumer Price Index (Oct): -0.4% YoY
21:00: Chinese Retail Sales (Oct): 15.7% YoY
21:00: Chinese Industrial Production (Oct): 15.2% YoY
Post-market EPS: AONE (-.36/19.2M); PAAS (.21/116M); WTW (.64/318M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 below fair value and the NASDAQ futures are trading 4 below fair value in very light overnight trading. European markets are flat after fluctuating on either side of unchanged for the early morning session. Earnings met with a mixed response as HSBC (HSBA.LN), Schroders (SDR.LN) and Imperial Tobacco (IMT.LN) rising whilst Barclays (BARC.LN), Trygvesta (TRYG.DC) and Vodafone (VOD.LN) fell. Euro-zone and German sentiment surveys came in weaker than expected, as did the French Industrial production number. Asian markets closed higher but many weakened into the close (India moved down 200 points from the opening session highs). A weaker US dollar pushed commodities prices and their associated stocks higher. Axa Asia Pacific (AXA.AU) rose again in the wake of rejecting a takeover bid yesterday and AMP (AMP.AU) rose on speculation it might become a takeover target. Trading firms rose in Japan with banks also up after the banking minister suggested the country might not strictly enforce capital requirements.

Research Calls/Market Moving News:

PCLN (173.73): reports Q3 pro-forma EPS $3.45 vs Reuters $2.92:
Company reports revenues of $730.7M vs Reuters $699.9M. reports Q3 gross bookings $2.72B vs StreetAccount consensus $2.56B: Represents y/y growth of +32.8% vs guidance for +20-26%. Q4 guidance: Gross bookings growth +30-40% vs SA +32%. International +50-60% vs SA +39% (local currency +37-46%). Domestic +15% vs SA +21%. PCLN shares are up 7%.

AIG (36.18): American International Group may be able to pay back Fed loan, says Moody's: Moody's says that AIG will be able to repay its credit line from the Federal reserve and "much or all" of Treasury's investment should financial markets stabilize. AIG shares are up 7.5%.

HMIN (32.89): HMIN Q3 profit .40 cents vs. street at .24 cents. Sales of 106 million exceeded consensus of 94.7 million. Guides revenues to between 98.9-101.8 million. Street at 89.4 million. Shares are indicated up 11% on tiny volume.

HBC (58.30): HBC up 4.5% after the company releases their Q3 interim management statement: Profitability for the first nine months of 2009 was stronger than expectations at the start of the year, as positive trends experienced in H1 continued into Q3. Year to date pre-tax profit was ahead of the comparable period in 2008 on an underlying basis, excluding movements in fair value on the company's own debt related to credit spreads. In the US consumer finance run-off portfolio, loan impairment allowances declined in the quarter.

BCS (23.17): BCS is trading down 3.5% following its Q3 interim management statement. The company reports it has maintained strong income momentum in Q3, particularly in Barclays Capital and across the international activities of GRCB, enabling the company to achieve consistent profitability across the first three quarters of 2009. Guides impairment for the full year currently expected to be around the bottom end of the previously referenced 2009 consensus range of £9.0-9.6B.

JASO (4.12): JA Solar reports Q3 EPADS $0.10 unclear if comparable to Reuters Reuters $0.03: Company reports revenues of $193.0M vs Reuters $137.2M. Q3 shipments: 177MW. Gross margin: 16.7% vs 11.4% seq. Mgmt expects Q4 shipments of 170-200MW. JASO shares are up 4.5%.

FLR (48.01): Fluor (FLR) reports Q3 EPS $0.89 vs Reuters $0.90, guides FY EPS to $3.75-3.90 vs prior $3.80-4.10 and Reuters $3.86. FLR is trading down 6%.

AAPL (201.46); GOOG (562.51): WSJ looks at the cooperation between Google and Verizon Wireless to take on the iPhone: Before the Droid, neither company had worked closely with the other before but now there is a growing friendship between the CEOs of the 2 companies. The largest marketing campaign in Verizon Wireless's history is backing the Droid. Argues that the deal that created the Droid was essentially the result of the growing friendship between the CEOs and that things like Verizon Wireless going with Microsoft for its phone search did not derail the deal because of the friendship.

ENER (10.93): Energy Conversion downgraded to sell from hold at Citi: Target cut to $7 from $12

WYNN (63.54); LVS (16.79): Water rationing may begin in Macau this weekend - London Times: Casino operators have not been told what to do. A drought has exacerbated what the article terms "years of mismanagement" at reservoirs that Macau relies on just across the Chinese border in Zhuhai.

Thursday, November 5, 2009

November 5, 2009: Morning Call

Fair Value: SP500 – 1043.70; NDX: 1679.44; DOW: 9758.71

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance

5-Day Outlook:

Today: Jobless Claims, Productivity, October Same Store comps
Friday: Change in US Payrolls (-175k), Unemployment Rate: 9.9%. Consumer Credit
Next Week: Multiple Fed speakers address the economic outlook, Chinese Retail Sales and Industrial Production.

Notable Earnings: Thursday Post-close: EOG, PSA, CROX, SUN. Friday Pre-market: AIG. Monday Pre-market: DISH, WCRX. Monday Post-Close: FLR. Tuesday Pre-market: BZH, JASO. Tuesday Post-Close: AONE

Key Macro Trends: Will the highly accommodative/dovish Fed statement reinforce the “risk/reflation trade?” Or will investors “sell the news” and take profits in the near-term given the substantial relative outperformance vs. the S&P 500? Key proxies are Crude Oil, Gold, Euro, high beta technology/commodity stocks, and commodity currencies (Real, Australian Dollar, Canadian Dollar). Financial sector underperformance is another important trend. Fears about government intervention and persistently high credit costs are weighing on the sector, particularly the weaker balance sheet companies. M&A and other corporate actions: Is the BRK for BNI a one-off blockbuster deal or does this signal more mega-deals? RIMM announces a 1.2 billion dollar share buyback this morning. CSCO added 10 billion dollars to its share repurchase authorization last night. Key Short term resistance stands at 1060. Short-term support stands at 1039-1044. Intermediate/Long-term support at 998-1003. Resistance at 1098-1103.

Daily Calendar of Events:

Pre-market EPS: ALD (.07/79M); CAH (.42/24.04B); CI (1.03/4.64B); CNQ(1.23/2.51B); CVS (.64/24.57B); DTV (.40/5.42B); FSYS (.42/104.3M); HOC(.45/1.48B); KIM (.31/194.2M); NDAQ (.42/653.8M); OCR (.60/1.55B); SLE(.15/3.17B); TRI (.40/3.26B)
05:00: Euro-zone Retail Sales (Sep): 0.4% MoM; -2.1% YoY
07:00: Bank of England Announces Interest Rate Decision
07:00: Select Retailers release October Same Store Sales
07:45: ECB Announces Interest Rate Decision
08:00: GE presents at Goldman Sachs Industrials Conference
08:30: US Productivity (Q3): 6.0%; Unit Labor Costs: -3.5%
08:30: Initial Jobless Claims: 519,000; Cont. Claims: 5.8 million
10:00: CNO earnings call
10:00: JPM presents at BancAnalysts Association of Boston
10:30: EIA Natural Gas Storage Change
11:00: ICSC Chain Store Sales
18:00: G20 Finance Ministers and Central Bankers meet in Scotland
Post-market EPS: CBS (.23/3.18B); CHH (.52/168.6M); CROX (-0.08/156.4M); CSTR(.59/326.3M); EOG (.66/1.11B); NVDA (.10/834.1M); PSA (1.25/370.7M); SBUX(.21/2.39B); SUN (.03/7.83B); VRSN (.32/258.8M);

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 4 points above fair value and the NASDAQ futures are trading 8 points above fair value at 8:00am ET. Asian markets fell led by consumer companies and banks (Japan down 1.3%, Hong Kong down 0.63%, South Korea down 1.7%, Shanghai up 0.30%, India up 0.95%). South Korea said it was unlikely that the economic recovery will be sustained. India reversed early losses on a report saying the government may lower telecom license fees. China fluctuated before ending higher with transportation stocks up after China Eastern (600115.CH) got approval for a share sale, and commodity producers fell on speculation stimulus measures may be withdrawn. Hong Kong saw profit taking. New Zealand reported its highest quarterly unemployment rate in nine years. Retailers fell in Australia after David Jones (DJS.AU) reported Q1 sales growth that missed forecasts. European markets are down 0.35% but have pared opening losses of nearly 1%. Decliners on the FTSE 100 lead advancers 7-3. Technology and basic material stocks are lagging.

Research Calls/Market Moving News:

RIMM (57.61): Research In Motion announces common share repurchase program: RIMM announced that its board has authorized a share repurchase program to purchase for common shares having an aggregate purchase price of up to $ 1.2B, or approximately 21M common shares based on current trading prices (representing approximately 3.6% of the currently outstanding common shares of RIM). The share repurchase program may commence on 9-Nov and will remain in place for up to 12 months or until the purchases are completed or the program is terminated by RIM. RIM has not repurchased any shares within the past twelve months.

CSCO (23.29): Cisco Systems reports Q1 EPS $0.36 ex-items vs Reuters $0.31: Company reports revenues of $9.02B vs Reuters $8.75B. Cisco Systems increases share repurchase program by $10B. stock. Cisco's board had previously authorized up to $62B in stock repurchases. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases under this program, including the additional authorization, is approximately $13.1B. Cisco Systems guides Q2 (Jan) revenue to be up 1-4% y/y - conf. call: Implies a range of $9.18-9.45B vs Reuters $8.98B.

GS (169.50): Goldman Sachs has benefited more than most from low interest rates says the WSJ: A 'Heard on the Street' column notes that Goldman's interest rate on its long term borrowings was only 0.92% in Q3 compared to 3.53% a year ago. This is lower than many competitors but costs may be computed differently. Most of the Street uses interest-rate derivatives to effectively convert long term debt to floating rate. If the Fed keeps rates low for as long as it says, this advantage should accrue to Goldman's benefit for some time to come.

RIMM (57.61): Research In Motion is the company at risk from the Droid says the WSJ: A 'Heard on the Street' column says that the Motorola Droid from Verizon Wireless appears to be a strong competitor to the iPhone but the real loser in this fight might be RIMM and its BlackBerry phones. As long as the iPhone was the only phone with a good web browser, the BlackBerry's lack of a solid web experience was not an issue. But now there are several phones offering a robust browsing experience including the Palm Pre and the Droid. RIMM could see some defections in coming months with consumers now representing the majority of new subscribers and satisfaction with BlackBerry's dropping among both consumers and IT departments. Even if it turns things around, margins have been dropping as devices become more complex and the increased competition may lead to price competition. Even after the recent selloff, the shares may still be pricey.

COST (58.81): Costco reports Oct comps +5% vs StreetAccount +4.2: Company reports October net revenues +7% to $5.68B. US comps were +2%; international comps +17%. US comps (excluding the impact from gasoline deflation) were +3%; international (excluding the effects of foreign exchange) +7%; total comps (excluding aforementioned effects) +4%.

FSYS (33.80): Fuel Systems Solutions reports Q3 EPS $0.77 ex-$0.11 gain vs Reuters $0.43: Shares are up 10% in the pre-market. Company reports revenues of $116.2M vs Reuters $104.3M. Gross profit for Q3 2009 was $39.4M, or 34% of revenue, compared to $30.7M, or 29% of revenue a year ago, reflecting increased operating efficiencies. Operating income for the period totaled $23.1M, or 20% of revenue, compared to $18.2M, or 17% of revenue, in Q3 of 2008. Guides full year revenues to $415-425M vs Reuters $379.7M. The company is targeting 2009 gross margin between 30% and 32% and 2009 operating margin to be between 14% and 16%.

GG (39.88): Goldcorp reports Q3 adj. EPS $0.19 vs Reuters $0.16; increases full-year production guidance: Company reports revenues of $691.9M vs Reuters $614.5M . Q3 gold production was 621,100 ounces, +11% y/y. Total cash cost was $295 was $295 an ounce on a by-product basis and $297 per ounce year to date. Total cash costs on a co-product basis were $384 an ounce compared to $380 an ounce year to date. Company increases F09 gold production guidance to ~2.4M ounces from 2.3M ounces. Adds that guidance on total cash costs has also changed in light of its stronger operating performance. Total cash costs for 2009 are now expected to be ~$300 per ounce on a by-product basis compared with previous guidance of $365 per ounce. On a co-product basis, total cash costs are now expected to be less than $400 per ounce compared to previous guidance of $400 per ounce.

CF (86.38): Agrium (AGU) makes "best and final offer" for CF Industries Holdings of $45/share in cash plus 1 share AGU: The cash and stock offer totals $92.99 at yesterday's AGU close of $47.99. The offer was consistent with the report form the WSJ this morning. Also as noted by the WSJ, AGU said that it has received a "No-Action" letter from Canadian Competition Bureau and has re-filed notification under Hart-Scott-Rodino. AGU has extended the expiration of the offer to midnight on 18-Nov. CF is trading down 6 points as AGU appears willing to walk on November 18 if CF does not come to the table.

Wednesday, November 4, 2009

November 4, 2009: Morning Call

November 4, 2009: Morning Call

Fair Value: SP500 – 1042.50; NDX: 1677.99; DOW: 9728.58

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance


Pre-market EPS: ADP (.50/2.05B); BDX (1.25/1.84B); BHI (.35/2.23B); CMCSA(.25/8.83B); DVN (.89/2.01B); FWLT (.66/1.29B); GRMN (.69/706.6M); MMC(.27/2.59B); PHM (-.61/1.1B); RDN (-1.25/263.4M); RIG (2.63/2.83B); TWX(.53/7.11B)
04:00: Euro-zone PMI Services (Oct): 52.3; Composite: 53.0
05:00: Euro-zone PPI (Sep): -0.4% MoM; -7.7% YoY
07:00: MBA Mortgage Applications
08:15: ADP Employment Change (October): -190,000
08:30: PHM earnings call
08:45: JOYG presents at Goldman Sachs Industrials Conference
09:00: Treasury Announces Quarterly Refunding
09:30: PCAR presents at Goldman Sachs Industrials Conference
10:00: RIG earnings call
10:00: FWLT presents at Goldman Sachs Industrials Conference
10:30: GRMN earnings call
10:30: DOE Crude Oil and Gasoline Inventories
13:30: BNI presents at Goldman Sachs Industrials Conference
14:15: FOMC Rate Decision: 0.25%
14:15: CSX presents at Goldman Sachs Industrials Conference
15:00: UNP presents at Goldman Sachs Industrials Conference
16:00: KLAC Annual Meeting
16:30: CSCO earnings call
17:00: Select Retailers release October Same Store Sales
Post-market EPS: ALL (1.01/6.51B); CSCO (.30/8.74B); CNO (.22/1.12B); MUR(.97/4.74B); NWS (.18/7.15B); PRU (1.34/6.66B); QCOM (.52/2.72B); WFMI(.18/1.84B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 5 points above fair value and the NASDAQ futures are trading 2 points above fair value at 7:45am ET. The ADP Employment Change and the FOMC statement will be a key focus today. European markets are up 0.70% to 1.4% led by a 5% gain in Marks and Spencer (MKS LN) after the company’s earnings exceeded expectations. Basic material stocks are also stronger in Europe led by continued momentum in gold. The US dollar is slightly lower on expectations that the Fed will repeat the key phrase in the policy statement that rates will say on hold for an “extended period.” France and Germany Oct Final Services PMI were revised below prelim readings at 57.7 and 50.7 respectively, whilst Eurozone Oct Final Services PMI 52.6 topped prelim estimate. UK Oct Services PMI 56.9 vs con 55.5. Eurozone Sep PPI (7.7%) y/y vs con (7.7%). Advancers on the FTSE 100 lead decliners 4-1. Asian markets closed higher led by India, which reversed 3.3% higher, snapping a 6-day losing streak. India’s finance minister said the government would maintain the stimulus measures propelling basic material and energy stocks 4.5% to 9% higher. Financials led South Korea higher following strong earnings reports. Hong Kong rebounded on bargain hunting with property developers and commodity stocks leading the way. Westpac Bank (WBC.AU) led banks up in Australia after releasing FY results. Property shares fell on a report that banks have tightened their mortgage lending on expectations Beijing may raise interest rates. Australia Sep retail sales (0.2%) m/m vs survey +0.5%.

Research Calls/Market Moving News:

WFC (27.74): Wells Fargo bets on a recovery when helping mortgage holders reports the WSJ: The bank has about $107B in debt tied to option adjustable rate mortgages. Many borrowers own homes worth less than the balances and can't afford to pay an amount that would reduce their loan principal. In response, the bank is gambling on a recovery by issuing thousands of interest only loans that defer borrowers' balances for as long as 6-19 years. It is wagering that a housing recovery and consumer income recovery will eventually cover their underwater debt. As a result, the bank is avoiding large write-downs from foreclosures but it holds billions in debt tied to distressed properties in battered markets.

MA (219.20): MasterCard target increased to $275 from $240 at Deutsche Bank: The firm recommends purchase on the weakness following Q3 earnings, which it attributes to the relative lack of visibility into 2010. F10 estimates are increased to $13.80 and $5.51B; Reuters is $13.12 and $5.55B, respectively. The rating remains buy.

GRMN (31.41): Garmin reports Q3 EPS $1.02 ex-items vs Reuters $0.69; Company reports revenues of $781.3M vs Reuters $706.6M. Net sales: Auto/Mobile $546M vs StreetAccount consensus $489M Outdoor/Fitness $132M vs SA $113M. Aviation $58M vs SA $62M. Marine $45M vs SA $42M. GRMN is trading up 5.6% in the pre-market.

STEC (23.15): STEC reports Q3 EPS $0.50 ex-items vs Reuters $0.47: Company reports revenues of $98.3M vs Reuters $94.1M; reports non-GAAP gross profit margin of 49.8% vs 34.1% y/y. Guides Q4 EPS to $0.51-0.53 ex-items vs Reuters $0.52; guides revenues to $101-103M vs Reuters $106.0M. Shares are down 30%.

STEC (23.15): Think Equity downgrades STEC to hold from buy. “STEC reported September-quarter results ahead of the Street. But, revenue guidance for F4Q09(Dec) at $102M is below the consensus of $106M. STEC attributed weak guidance to Zeus Inventory at EMC. Also, STEC said it will probably take through 1Q10 to clear out inventory. We believe new competing solutions in 1Q/1H10 could make ZeusIOPs a tougher sell, with solutions at SAS, PCIe from Seagate, Micron, SMOD, Pliant, FusionIO, Samsung, and Intel and alternative solutions from the storage OEMs Sun, NetApp. We got this one wrong, and lower our rating from Buy to Hold. STEC guiding December quarter to $101-103M versus consensus of $106M. Company saying weaker guidance due to inventory of ZeusIOPS storage solutions at EMC as it has not been able to sell through all the solutions. STEC saying the slower sell through on the ZeusIOPS has been due to customer perception of a longer payback period on the more expensive SSD investment. STEC is therefore setting up a sales team to jointly market the SSD solutions with EMC and other storage OEMs to potential customers. We believe 1) the fact that the ZeusIOPs SSD has not been able to sell through on its lower cost of ownership merits could imply more pricing pressure on the Zeus solutions, which combined with higher marketing expense make for a less profitable enterprise opportunity. 2) STEC also saying could take through 1Q10 to clear out the ZeusIOPs SSD at EMC, which could enable the competition to close the technology gap. 3) By 1Q/1H10, we believe there would be multiple solutions in the market from Seagate, Micron, SMOD, Intel, Pliant, FusionIO and Samsung for both the Server and storage markets in SAS and PCIe to compete with ZeusIOPS FC SSDs. 4) We believe the competitive offerings could imply market share and pricing risk for STEC, also 5) other Storage OEMs not as keen on SSDs. Given the increasing competitive pressures and risk of pricing, market share, inventory risk, continuous pressures on lowering cost of ownership from competing solutions the risk to the downside.”

RIG (85.91): Transocean reports Q3 EPS $2.65 ex-items vs Reuters $2.65: First Call is $2.67. Company reports revenues of $2.82B vs Reuters $2.84B. Total drilling fleet dayrate $283,800 vs. $255,900 seq. and $242,200 y/y Total drilling fleet utilization 75% vs. 84% seq. and 89% y/y.

WYNN (56.13); LVS (15.14): Macau casino revenue rises 42% y/y in October to MOP12.6B ($1.58B), says Macao Daily News – Bloomberg: The paper cites the news agency Lusa.

BAC (14.80): Bernstein comments on Bank of America, continues to rate the shares outperform: The firm believes the market's fear of an imminent capital raise ahead of an announcement regarding the CEO position is premature and notes most reasonable capital raise scenarios are not EPS dilutive given the extinguishing of TARP dividends.

Tuesday, November 3, 2009

November 3, 2009: Morning Call

November 3, 2009: Morning Call

Fair Value: SP500 – 1039.69; NDX: 1671.43; DOW: 9740.68

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance


Pre-market EPS: ABC (.40/17.85B); ANR (.35/756.2M); ADM (.55/16.96B); AMT (.17/430.9M); CTSH(.41/805.6M); EMR (.60/5.29B); ENR (1.16/1.06B); ICE (1.14/255.6M); MA(2.92/1.34B); MRO (.57/13.24B); MLM (1.20/483.6M); VIA (.56/3.28B); VNO(1.14/604.1M); UBS (.18/6.5B)
09:00: MA earnings call
10:00: US Factory Orders (Sep): 1.0%
13:00: Domestic Vehicle Sales (Oct): F, GM should release sales stats
15:00: UBS earnings call
16:30: API Crude Oil and Gasoline Inventories
Post-market EPS: CNW (.53/1.14B); DVA (.99/1.53B); HIG (1.15/6.13B); KFT(.48/10.3B); STEC (.47/96.7M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points below fair value and the NASDAQ futures are trading 12 points below fair value at 8am ET. Warren Buffett’s Berkshire Hathaway announces a blockbuster $34 billion dollar offer for BNI. I find it surprising that the S&P futures have only moved 3 points higher since the Berkshire for Burlington transaction news was announced. I would have predicted a much sharper gain given the size of the transaction and signal of confidence from Buffett. The muted reaction is the result of weakness in European markets, which are down 2% following poor earnings from UBS (down 7%). The Euro and British pound are under pressure following news that RBS and Lloyds will receive 31.3 billion pounds in a second bailout from the UK government. There is a building narrative in the market that global financial stocks will face serious headwinds in the form of government orders and or legislation; this storyline is particularly strong in Europe, where the government has forced asset sales and have taken a much harder line on compensation practices than in the US. Asian markets closed lower with India the weakest major market in the region (Japan closed, India down 3.1%, Shanghai up 1.2%, Hong Kong down 1.8%). India fell on disappointing earnings from Hindalco and Reliance Communications. Hindalco, India’s largest aluminum company, fell 11% and Reliance Communications, India’s second largest mobile phone operator, fell 5.7%. China rose in active trade as growth in bank lending raised expectations of sustained economic growth. Gold stocks rose in Australia, but banks fell as the central bank raised interest rates for the second time in a month. Banks in Indonesia were hurt when the IMF said it expects the economy to grow at a lower rate in 2010 than the government had targeted. IMF raised its 2009 and 2010 forecasts for Hong Kong.

Research Calls/Market Moving News:

BNI (76.70): Berkshire Hathaway agrees to acquire Burlington Northern for $100/share in cash and stock: The boards of Berkshire Hathaway (BRK.A) and Burlington Northern Santa Fe announced a definitive agreement for Berkshire Hathaway to acquire for $100 per share in cash and stock the remaining 77.4% of outstanding BNI shares not currently owned. Based on the number of outstanding BNI shares, the transaction is valued at approximately $44B, including $10B of outstanding BNSF debt.

UBS (16.78): UBS reports Q3 EPS (CHF 564M) vs Bloomberg (CHF 345.0M) and year-ago CHF283M: Results include charges totaling CHF 2,150M. Company reports operating income of CHF5.77B vs year-ago CHF5.54B.

MA (222.65): MasterCard reports Q3 EPS $3.48 ex-items vs Reuters $2.93: First Call is $2.94. Company reports revenues of $1.36B vs Reuters $1.35B.

Federal reserve regulators want banks to begin to overhaul compensation before rules are finalized reports the WSJ: The Federal Reserve has informed top bankers that they should start to overhaul employee compensation as soon as possible, even before the Federal Reserve finishes the proposed rules on compensation. Executives at the top 28 domestic and foreign banks were told to turn over by 1-Feb a list of the changes they will make to align their compensation practices with the Fed's rules. The rules will be finalized by year's end. The Federal Reserve wants the banks to consider the rules when they decide on 2009 bonuses. Several Federal Reserve branches held talks with bank officials from their areas.

AAPL (189.31): Apple wants TV networks to join it in iTunes service to let subscribers download unlimited TV shows for $30/month - NY Post: Sources familiar with the talks say they are still at an early phase, although Apple has been trying to sell the idea to cable and broadcast networks for months. A source familiar with Apple's plans says it is trying to sell broadcasters on a revenue-sharing structure based on usage, meaning it would pay more for popular shows and less for less popular ones. Network sources say the idea offers no support for niche shows.

ANR (34.29): Alpha Natural Resources reports Q3 EPS $0.47 ex-items vs Reuters $0.35: Company reports revenues of $729.2M vs Reuters $758.6M. ANR increased guidance for metallurgical coal shipments in 2010 to a range of 10 to 12M tons, a one million ton increase from the previous guidance range of 9 to 11M tons.

Monday, November 2, 2009

November 2, 2009: Morning Call

November 2, 2009: Morning Call

Fair Value: SP500 – 1033.01; NDX: 1665.66; DOW: 9664.03

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1039-1044 support/1066, 1110 resistance


Pre-market EPS: CLX (.95/1.37B); F (-.13/27.41B); HUM (1.77/7.77B); SYY(.45/9.18B)
04:00: Euro-zone PMI Manufacturing (Oct. Final): 50.7
08:15: HGSI BENLYSTA Pivotal Phase 3 Trial Results
10:00: ISM Manufacturing (Oct): 53.0; Prices Paid: 64.0
10:00: Pending Home Sales (Sep): 0.4% MoM
10:00: Construction Spending (Sep): -0.3%
11:00: F earnings call
11:45: SPWRA presents at Wedbush Clean Technology Conference
15:15: Fed’s Tarullo speaks on executive pay
16:30: STP presents at Wedbush Clean Technology Conference
Post-market EPS: APC (-.34/1.92B); CHK (.65/1.81B); KGC (.12/562.8M); PFG(.65/2.49B); VMC (.38/808M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 5 points above fair value at 7:30am ET. The Euro is bouncing against the dollar after trading lower 5 of the previous six sessions. Basic material, energy, and gold stocks are rallying in Europe following a better than expected Chinese PMI report (55.2 vs. 54.7). The Australian dollar is also trading higher on expectations the central bank will raise interest rates tomorrow. European markets are trading modestly higher (up 0.20% to 0.50%) after opening down 0.25% to 0.50%. Strength in commodities and the Euro is offsetting weakness in some financial stocks; RBS is trading down 7% on concerns that the EU will force the bank to sell more assets than previously planned. Asian markets closed lower with the exception of Shanghai, which rallied 3% (Japan down 2.3%, Hong Kong down 0.61%, South Korea down 1.3%). Markets in China bucked the trend lower due to the strong PMI data. HSBC (5.HK) fell on a report the bank’s provisions for bad debts in the US may stay high for the near future, and Hong Kong fell as home sales dropped. Steelmaker, technology, and automobile sectors all took South Korea lower. Most financial and resources stocks led Australia lower. The yen’s strength and a desire to avoid risk took Japan down in advance of tomorrow’s holiday. India was closed for Gurunanak Jayanti.

Research Calls/Market Moving News:

AAPL (188.50): Chinese reception of Apple's iPhone is tepid says the WSJ: There were no signs of the sort of sellout reception that met the launch of the phone in other countries. As of Sunday night, many stores still had the phone in stock. Apple and China Unicom declined to disclose sales figures.

F (7.00): Ford reports Q3 EPS $0.26 ex-items vs Reuters ($0.12): Company reports revenues of $30.90B vs Reuters $27.62B.

RIMM (58.73); PALM (11.61); MOT (8.57): Citi upgrades MOT; downgrades PALM, RIMM: Upgrade: Motorola (MOT) upgraded to buy from hold; target increased to $10.50 from $9. Shares area also added to Top Picks Live List. Downgrade: Palm (PALM) downgraded to sell from hold; target cut to $10 from $19.50. Research In Motion (RIMM) downgraded to sell from hold; target cut to $50 from $100.

TRA (31.77): CF Industries Holdings (CF) offers to acquire Terra Industries for more than $40.50/share: The offer of $32 in cash and 0.1034 of a CF share, including a $7.50 per share dividend declared by Terra, is worth $40.61/share based on CF's 30-Oct closing price

EAC (37.07): Denbury Resources (DNR) to acquire Encore Acquisition (EAC) for $50/share.

CIT (0.72): CIT Group files for bankruptcy; no operating subsidiaries, including Utah bank, will be included in the filings: The company will proceed with the prepackaged plan of reorganization. All operating entities are expected to continue normal operations. The company has filed in the U.S. Bankruptcy Court for the Southern District of New York and expects to reduce total debt by approx $10B.

HGSI (18.69): Human Genome (HGSI), GlaxoSmithKline (GSK.LN) announce positive results in Phase 3 trial of Benlysta (belimumab): The 819-patient BLISS-76 study met its primary efficacy endpoint by achieving a statistically significant improvement in patient response rate vs placebo plus standard of care at Week 52. Study results also showed that the drug was generally well tolerated.

HGSI (18.69): Human Genome fair value estimate raised to $40 from $30 at Leerink: The firm sees probability of approval for Benlysta of 95%, up from 85% previously. Leerink says the drug continues to show a nice response and does not believe the 1mg/kg does will be approved, removing a potential concern that physicians would use the lower dose to save money. Shares reiterated outperform.

HGSI (18.69): Bernstein comments on Human Genome following BLISS 76 interim data: The firm expects controversy about the data as it was not the unconditional success seen in the BLISS 52 trial. Bernstein does believe there is enough for the company to proceed to filing and presumably approval and launch in 2011. Though shares will likely be volatile, the firm believes the overall trend is higher. Shares remain outperform rated with a $32 target.

Barron's latest Big Money Poll is still bullish: Almost 60% are bullish or very bullish with a mean prediction of 10,187 on the Dow by the end of the year and 10,771 by the middle of 2010. They see the S&P ending the year at 1121 and 1190 by the middle of next while the Nasdaq will rise to 2371 by the middle of 2010. But almost 80% see stocks are fairly valued or overvalued today. They see three sectors outperforming in the next 6-12 months: technology, energy and health care. Expected poor performers are financials and consumer cyclicals. Favorite stock: MSFT, ABT, BAC, BRK.A, CVS, GE, GS, LM and QCOM. Most overvalued: AIG, AAPL, GOOG, CAT, AMZN, C, GE, GMCR, VZ and YHOO.

GOOG (536.12): Google seeks profit from YouTube by convincing rights holders to monetize rather than remove their copyrighted content – Guardian: The company is trying to get rights holders to use ContentID, a fingerprinting system that allows them to identify their material even when it has been altered. Rights holders can either block the rest of the world from using their content or put ads alongside it, generating revenue that YouTube takes a small piece of. They can also link to sites that sell DVDs or CDs. Without being more specific, Google says the majority of rights holders are choosing to monetize their content. Roughly 333M of 7B videos streamed per week on YouTube use ContentID.

GS (170.17): Goldman Sachs in talks to buy millions in tax credits from Fannie Mae reports the WSJ: The talks are running into opposition from the Treasury Department which may block any deal. The administration is leery of approving a deal that would allow Goldman to reduce its tax bill even though a deal would bring some respite to Fannie. Goldman is hopeful it will win approval this week. Exact details were not learned but some on Wall Street believe Goldman is seeking to buy $1B in credits.

C (4.09): NY Times wonders if Citi can stand on its own without government help: The government has bailed out the entity now known as Citigroup at least 4 times in the past. CEO Pandit says it is not a troubled bank but they have received a lot of government assistance. The bank hopes to sell off or get rid of the asset management unit, consumer lending and some companies recently acquired. With government help, the financial cushion at the bank has increased significantly. But the bank is not generating the profits to cover the potentially devastating write-downs to come. Says Citi was managed horribly over the last decade and regulators missed the many problems. Generally cautious article.

WSJ notes the large amount of cash on the books of U.S. companies: The cash level on balance sheets is the highest in 40 years. There is more cash and more as a percentage of assets. Nothing particularly new, the large amount of cash on the books of U.S. companies has been frequently mentioned for several months now. In Q2, at the 500 largest nonfinancial firms, there was about $994B in cash and short term investments totaling 9.8% of assets compared to $846B or 7.9% a year before. In Q3, of the 248 of those companies that have reported, cash has increased to 11.1% of assets from 10.1% in Q2. The increase has happened at a diverse selection of companies from Alcoa to Google to PepsiCo to Texas Instruments.

Wednesday, October 28, 2009

October 28, 2009: Morning Call

October 28, 2009: Morning Call

Fair Value: SP500 – 1060.13; NDX: 1720.87; DOW: 9833.78

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Pre-market EPS: COP (.93/37.63B); GD (1.40/7.74B); GT (.40/4.26B); HES (.50/7.1B); IP (.24/5.92B); NYB (.26/244.4M)
07:00: MBA Mortgage Applications
08:30: Durable Goods Orders (Sep): 1.0%; Ex-Transportation: 0.7%
10:00: New Home Sales (Sep): 440,000; 2.6% MoM
10:30: DOE Crude Oil and Gasoline Inventories
11:00: MEE earnings call
16:30: FSLR Earnings Call
Post-market EPS: AFL (1.20/4.75B); ASIA (.21/62.4M): AKAM (.34/199.2M); AVB (1.08/216.0M); CBG (.10/1.04B); CERN (.59/420.4M); DNB (1.10/394.8M); FLS (2.02/1.11B); FSLR(1.69/525.3M); LNC (.80/2.42B); ORLY (.56/1.22B); RYL (-.95/351.7M); VALE(.32/6.12B)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both 6 below fair value. The USD is stronger for the 3rd day in a row, weighing on commodities (down 1% across the board; Gold down 8 to 1032). Market sentiment also appears to be shifting toward risk aversion - VIX up to 25 from 20 a few days ago, AIG is down nearly 30% in the last 10 days, and Treasury bond auctions continue to see remarkable demand considering the yields. SAP is down 7.7% on weaker guidance. GMAC is in talks with the Treasury regarding another 3-6 billion dollar bailout. Irish banks are down 15% on concerns about potential requirements the EU may impose in return for government aid (ING ripple effect). European markets are down 1.5% with financials, technology, and basic material sectors among the weakest. Asian markets closed broadly lower for the 2nd session in a row. Keep an eye on AAPL and AMZN as they are important "risk proxies". AAPL and AMZN are clearly best of breed and both have scarcity value considering that virtually no other companies are exhibiting the same kind of secular growth. But, both stocks will be subject to increased risk aversion given that momentum investors are quick to sell. That said, I expect both stocks will continue to outperform the S&P 500 and other technology stocks given the scarcity value.

Research Calls/Market Moving News:

MEE (31.31): Massey Energy reports Q3 EPS $0.19 vs Reuters $0.18: Company reports revenues of $641.6M vs Reuters $686.4M. Q3 EBITDA $112.1M vs. Reuters $110.7M. produced coal shipments to be between 37.5 and 38.5M tons, down from prior 38.5-40.5 tons. MEE is trading down 4% in the pre-market.

GMAC in talks with the Treasury about additional financial support – WSJ: The Journal cites people familiar with the matter who say that GMAC and the Treasury are in advanced talks regarding additional financial support. These sources say that the government is likely to inject $2.8B to $5.6B into GMAC, on top of the $12.5B that the lender has already received since December of 2008. The new funds are expected to come in the form of preferred stock. Recall that the government currently owns a 34% stake in the company. The article also notes that the FDIC told GMAC on Tuesday that it will guarantee an additional $2.9B in debt in an effort to make it easier for the company to sell debt to investors. The agency backed $4.5B in GMAC-issued debt earlier this year.

AAPL (197.37): Apple says they intend to defend the Nokia patent case vigorously in 10-K filing: “Plaintiff Nokia Corporation filed this action against the Company on October 22, 2009 in the United States District Court for the District of Delaware, alleging infringement of U.S. Patent No. 5,802,465, U.S. Patent No. 5,862,178, U.S. Patent No. 5,946,651, U.S. Patent No. 6,359,904, U.S. Patent No. 6,694,135, U.S. Patent No. 6,755,548, U.S. Patent No. 6,882,727, U.S. Patent No. 7,009,940, U.S. Patent No. 7,092,672, and U.S. Patent No. 7,403,621. The complaint alleges that these patents are essential to one or more of the GSM, UMTS and 802.11 wireless communications standards, and that the Company has the right to license these patents from plaintiff on fair, reasonable, and non-discriminatory (“FRAND”) terms and conditions. Plaintiff seeks unspecified FRAND compensation and other relief. The Company’s response to the complaint is not yet due. The Company intends to defend the case vigorously.”

MT (35.56): ArcelorMittal reports Q3 EPS $0.60 vs Bloomberg $0.00 and year-ago $2.78: Company reports revenues of $16.17B vs Bloomberg $18.85B and year-ago $35.20B; reports EBITDA of $1.59B vs Bloomberg $1.96B and year-ago $8.58B. Shipments totaled 18.2M tons vs year-ago 25.6M. Guides Q4 EBITDA to $2.0-2.4B vs Bloomberg $2.62B. ArcelorMittal's CFO says 2009 not expected to be a break-even year, net loss likely.

Visa (V) reports Q4 EPS $0.74 ex-items vs Reuters $0.72, authorizes $1B share repurchase plan.

AKS (17.18); X (37.41): KeyBanc downgrades AKS, X: AK Steel (AKS) downgraded to hold from buy. U.S. Steel (X) downgraded to hold from buy. Firm notes concern that the rate of real economic recovery in NA is occurring too slowly relative to current market expectations.

City minister pressuring investment banks to reduce underwriting fees for Lloyds Banking Group's rights issue – Guardian: The article says that six unnamed investment banks have reduced their fees by £100M after lobbying by the Treasury, but says that Lord Myners is pressuring them to lower their charges even more.

ING (12.96): ING Group upgraded to buy at Bank of America Merrill Lynch -- Bloomberg

WSJ discusses latest developments surrounding "too big to fail" legislation: Citing people familiar with the matter, the Journal reports that under a deal hashed out between the Treasury and House Financial Services Committee Chairman Barney Frank (D., Mass.), financial firms with more than $10B of assets would have to pay for the rescue or unwinding of a collapsed competitor. The paper adds that while the agreement fits with efforts on the part of Democrats to shift the burden of future financial crises away from taxpayers and toward the financial industry, it would not prohibit government funds from being injected into failing firms. The Journal goes on to note that roughly 120 banks currently have more than $10B of assets.

BAC (15.45): Bank of America CEO search hits a snag – WSJ: Citing people familiar with the process, the Journal reports that the BofA's search for a new CEO has slowed as directors have been frustrated by what they view as a shortage of high-profile financial executives who are right for the job. The paper adds that while the company had hoped to choose a successor to retiring CEO Ken Lewis in time for the full board to vote on the matter at its regularly scheduled meeting on Wednesday, committee members have indicated that they need additional time. According to the article, Chief Risk Officer Gregory Curl, and Brian Moynihan, the bank's consumer and small-business banking chief, remain the leading internal candidates for the job. However, some large shareholders are pushing hard for the board to seriously consider outside CEO candidates. Of interest, BlackRock (BLK) Chairman and CEO Larry Fink, who is being backed by some executives inside of BofA, has had no conversations with the board and has reportedly told people close to him that he is not interested in the job.

WYNN (56.13): Wynn Resorts upgraded to outperform from perform at Oppenheimer: Target is $73.. Recent weakness offers an attractive entry point.

BX (14.39): Blackstone Group is talks to reduce Hilton's debt load reports the WSJ: Sources say Blackstone has begun talks with lenders to cut up to $5B from the $20B debt load of Hilton Worldwide, the single biggest investment of Blackstone. The firm is considering contributing another $800M in equity to buy back debt at a discount as well as seeking to extend some debt maturities. Talks are in the preliminary stages. One complication is that about $4B in debt is held by the Federal Reserve from the Bear Stearns deal.

Wednesday, October 14, 2009

October 14, 2009: Morning Call

October 14, 2009: Morning Call

Fair Value: SP500 – 1069.66; NDX: 1728.25; DOW: 9817.54

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance

Pre-market EPS: ABT (.90/7.74B); ACGY (.12/552.0M); GWW (1.34/1.60B); LUFK(.20/119.0M); JPM (.52/25.05B)
08:30: Import Price Index (Sep): 0.2% MoM; -11.7% YoY
08:30: US Retail Sales (Sep): -2.1% MoM; Less Autos: 0.1%
08:30: CSX earnings call
09:00: CHK Investor Meeting
09:00: JPM earnings call
10:00: US Business Inventories (Aug): -0.8%
14:00: Minutes from the Sep 23 FOMC Meeting
14:30: Fed’s Tarullo testifies on bank industry at Senate panel
16:30: API Crude Oil and Gasoline Inventories
Post-market EPS: CCK (.79/2.33B); LSTR (.39/524.3M); STLD (.23/1.1B); XLNX(.24/414.1M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 14 points above fair value and the NASDAQ futures are trading 22 points above fair value at 7:45am ET. INTC’s earnings and forward guidance were well above street consensus. JPM also beat consensus but the magnitude and quality of the upside surprise was not on the same level as INTC. European markets are up 2.0% to 2.3% on the strong earnings. Stronger earnings from INTC, ASML Holdings (ASML.NA), Burberry (BRBY.LN), BASF (BAS.GR) and Rio Tinto (RIO.LN are setting the tone in Europe. Asian markets closed higher ex-Japan, which sat out the rally (Japan down 0.16%, Hong Kong up 1.95%, Australia up 0.95%, Shanghai up 0.90%, South Korea up 1.3%, India up 1.2%). China’s export decline slowed (-15.2% vs. street at –21%) and Australian consumer sentiment continued to rise. Tech stocks were bolstered by INTC’s upbeat outlook, though some fell on profit-taking after a run-up yesterday in expectation of Intel’s results. Chip equipment makers fell when the company trimmed its capex plan for next year.

Research Calls/Market Moving News:

INTC (20.49): Intel reports Q3 EPS $0.33 vs Reuters $0.28: Company reports revenues of $9.39B vs Reuters $9.06B. Guides Q4 revenues to $10.1B, +/- $400M vs Reuters $9.53B. The effective tax rate was 27%, versus the company’s expectation of 23%. Intel reports Q3 gross margin 57.6% vs StreetAccount consensus 54.6%. Intel does not expect an enterprise rebound during Q4 - conf. call: Management notes that consumer demand has led throughout 2009, a trend that is expected to continue through the fourth quarter. In response to analyst question on the Windows 7 cycle, management highlights what they believe is a lot of enthusiasm for the release but indicates that there has been little impact on enterprise demand thus far. Notebooks and netbooks continue to drive growth. INTC is up 4.2% in the pre-market.

JPM (45.66): Shares are up 3% after reporting EPS of 82 cents. Street consensus was at .52 cents. Buyside whisper number was around .65 cents. Revenues were very strong (28.8 billion vs. street at 25.1 billion). Credit losses came in higher than street views but investors are shrugging off the credit costs as higher revenues offset the increase in credit costs (9.8 billion vs. street at around 8-8.5 billion). JPM shares are trading up 3.5% in the pre-market.

LLTC (28.49): Linear Technology (LLTC) reports Q1 EPS $0.29 ex-items vs Reuters $0.25, guides Q2 rev +2-5% seq. implying a range $240.8-247.9M vs Reuters $221.0M. Shares are up 2% in the pre-market.

EMC (17.92): upgraded to overweight from market weight at Thomas Weisel Partners: Target raised to $24 from $15. Checks by the firm show improving demand trends with a recovery in storage spending. Weisel sees EMC as gaining further share following the launch of V-Max

Macau's hotel occupancy rate rises 3.7-percentage points y/y in August to 80.4%
The data is from the Macau Statistics and Census Service

LVS (17.74): Las Vegas Sands to launch $2.5B Hong Kong IPO next month - South China Morning Post: Sources familiar with the plans say Sands expects to complete the offering within four weeks of receiving regulatory approval, which it hopes to receive by the end of October

VLO (19.18): Valero Energy downgraded to sell from buy at Soleil Securities:
Target cut to $17 from $25.. Cites the firm's reduced refining margin forecast and the concerns of a major asset write-down along with Q3 earnings. Firm is also lowering estimates on FTO, HOC, SUN and TSO.

GG (42.88): Goldcorp upgraded to overweight from neutral at JPMorgan: The firm cites valuation and believes the dollar could experience weakness over the next one to two years. Target raised to $47 from $34.

Rising land prices may weigh on builders' margins – WSJ: In a "Heard on the Street" column, the Journal notes that signs of a recovery in housing prices suggest that some builders may soon return to profitability. However, the paper adds that with desirable land plots increasingly difficult to find, margins may not see a meaningful recovery. The article points out that while many publicly-traded builders expected to be able to restock at low prices, that dynamic has not played out even though many of their private competitors have been forced to file for bankruptcy. According to the Journal, lenders who have taken possession of land are wary about selling while the market is depressed, forcing prices higher in locations that builders are most interested in investing. Citing estimates from Jeff Spindler of land brokerage Park Place Land Advisors, the paper notes that prices for finished lots have risen 10-30% in the last four months in prime locations in California.

Some Securities Moving in early pre-market trading: Trading higher: CNO +14.2% (share sale agreement with Pauslon), AMD +6% (INTC sympathy), MYRX +5.9% (indentification of IND candidate), GPI +5.7% (guidance), INTC +5.5% (earnings), NVDA +4.2% (INTC sympathy), ALTR +3.5% (earnings), SMH +3.4% (INTC sympathy), CSX +3% (earnings), CSIQ +2% (guidance). Trading lower: Short and leveraged short ETF’s (SDS, SH, SKF, FAZ, EDZ, QID) are all on the point decliner list lower due to strength in broader markets.

Tuesday, October 13, 2009

October 13, 2009: Morning Call

October 13, 2009: Morning Call

Fair Value: SP500 – 1072.65; NDX: 1728.25; DOW: 9832.52

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance


Pre-market EPS: JNJ (1.13/15.19B)
08:30: Christina Romer speaks on the economy
10:00: IBD/TIPP Economic Optimism (October):
13:00: Fed’s Kohn speaks on the economy
13:15: Fed’s Dudley speaks on the economy
17:30: INTC earnings call
Post-market EPS: CSX (.71/2.34B); INTC (.27/9.0B); LLTC (.24/214.9M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are trading 2 points above fair value at 7:30am ET. European markets have bounced to unchanged after opening down 0.50%. Strength in steel and auto stocks has been tempered by a weaker German Investor confidence number (56.0 vs. 58.8) and a Meredith Whitney downgrade of GS. Basic material and steel stocks outperform on positive comments from Goldman Sachs on Asian steel demand. The weaker US dollar is another factor triggering a bounce off the overnight session lows; The US Dollar has dropped 0.60% against the Euro in the last 2 hours to 1.4865. Asian markets closed higher but pared gains into the close (Japan up 0.60%, Hong Kong up 0.79%, Australia up 0.97%, Shanghai up 1.49%, South Korea down 0.56%). A slightly weaker yen lifted Japanese automakers, and brokerage recommendations boosted steelmakers and banks. Energy companies and automakers led China up. In Australia banks recovered from yesterday’s selloff on a report they would start to write back up to A$8B in bad-debt provisions next year. Geely Automobile (175.HK) rose on higher Sep sales. Innolux Display (3481.TT) surged by its daily limit on a rumor that it had won an order to supply components for the iPhone (AAPL). Investors in South Korea used North Korea's test-firing of short-range missiles yesterday as an excuse to sell. India was closed for General Assembly elections.

Research Calls/Market Moving News:

GS (190.15): Goldman Sachs downgraded to neutral from buy at Meredith Whitney Advisory Group: Target is $186. Bloomberg headlines. GS shares are trading down 3.15 in the pre-market to 187

C (4.77): Citi initiated buy at Deutsche Bank: Target is $5.50. The firm notes relative position vs. other banks for an economic recovery as well as the removal of the overhang of the government's stake

Goldman Sachs predicts significant pick-up in M&A activity and highlights 14 stocks that could be in play: U.S. stocks are in a “perfect storm” for a jump in mergers and acquisitions, according to Goldman Sachs Group Inc., which cited inexpensive share valuations, available cash at companies and “accommodative” capital markets to finance the deals. In a report today, analysts at the New York-based bank highlighted 14 U.S. stocks with the highest probabilities of receiving a bid, including Devon Energy Corp. and Citrix Systems Inc.

JNPR (27.91); FFIV (41.68): Jefferies upgrades FFIV, JNPR: The firm believes deal close rates have improved and customer budgets have begun to loosen. In addition to the upgrades of FFIV and JNPR, estimates and targets for CSCO, EMC, PLCM, and RVBD have been raised. F5 Networks (FFIV) upgraded to buy from hold, target raised to $50 from $37. Juniper Networks (JNPR) upgraded to buy from hold, target raised to $34 from $21.

SYNA (23.42): Synaptics downgraded to underperform from hold at Jefferies: Target cut to $16 from $26. Firm cites a round of channel checks into the capacitive touch screen market. Jefferies believes CQ4 orders are tracking below guidance with stronger headwinds in 2010 due to share loss and a negative mix shift to modules likely driving another leg down in the stock.

DELL (15.42): Dell expects to be "reasonably active" in seeking acquisitions – Bloomberg: In an interview, CEO Michael Dell says the company will seek deals as part of its turnaround plan, will look at purchases that bolster sales to corporate customers, and will consider more deals in the health-care industry. He calls the health-care industry the sector of the economy with the lowest amount of IT.

Obama administration shelves plans for $200B in new taxes on multinationals reports the WSJ: The administration has set aside for now the idea of changing how the federal government taxes money earned in other countries. Aides say the idea may come back as part of a broader tax overhaul next year but for now the federal government will not tax overseas earnings before the money is brought into the U.S. For many businesses, preventing the taxation of non-repatriated profits was a key agenda item.

VNDA (11.45): Vanda Pharmaceuticals enters exclusive license agreement with Novartis (NVS) for commercialization and development of Fanapt in US and Canada.

Deutsche Bank upgrades life science tools group to overweight from market weight:Firm cites increased confidence in the sustainability of the market recovery, and related expectations of improved cap-ex budgets. Firm says key focus names in the group include TMO, ILMN, LIFE and BRKR, and the firm would continue to avoid AFFX.

BCRX (8.31): BioCryst Pharmaceuticals initiated market outperform at JMP Securities: Target is $15

Hong Kong gambling traded lower on concerns about potential Maucau restrictions: All are off their lows, but SJM Holdings (880.HK) has been down as much as 9%, Melco International Development (200.HK) has been down as much as 5%, and Galaxy Entertainment (27.HK) has been down as much as 2%. Recall it was reported overnight (in Asia) that Macau was considering imposing restrictions on gaming there.

Monday, October 12, 2009

October 12, 2009: Morning Call

October 12, 2009: Morning Call

Fair Value: SP500 – 1067.88; NDX: 1726.37; DOW: 9811

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003, 1041 support/ 1110 resistance


Pre-market EPS: FAST (.33/488.2)
12:15: NEC Chair Larry Summers speaks on the economy
13:15: Treasury’s Krueger speaks on the economy

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points above fair value and the NASDAQ futures are trading 9 points above fair value at 7:25am ET. The equity futures are reacting to strength in European markets, which are up 1.3% to 1.6%. PHG is up nearly 7% on a strong earnings report, helping to propel technology, industrial, and basic material sectors in Europe. Advancers on the FTSE 100 lead decliners 17-3. Xstrata (XTA.LN) announces divestment of its interest in El Morro project for $465M to Barrick Gold Corp (ABX). Fiat (F.IM) rose following Il Giornale reporting the company gets approval from Head of US auto task force for Chrysler plans. Nokia (NOK1V.FH) downgraded to neutral at HSBC. UK's Brown says government plans to sell £16B of assets over the next two years and ending quantitative easing program now would 'imperil recovery'. Asian markets closed mixed with India outperforming (up 2.3%) after the Prime Minister said the country’s growth would accelerate and stimulus measures will continue (Japan closed, Hong Kong down 0.93%, Australia down 0.29%, Shanghai down 0.38%, South Korea down 0.69%). Chipmakers rose in Taiwan as DRAM prices jumped on speculation a new Microsoft (MSFT) operating system will boost computer sales. Construction stocks also helped support the market. Banks weighed on Australia indices as Credit Suisse called them expensive compared to industrial options. Steelmakers and refiners dragged South Korea down.

Research Calls/Market Moving News:

GOOG (516.26): Google target increased to $620 from $530 at Thomas Weisel: The firm sees Q3 net revenue (ex-TAC) of $4.21B and sees Q3 EBITDA and pro forma EPS slightly below First Call estimates of $2.63B and $5.38, respectively. First Call consensus for revenues (ex-TAC) is $4.22B. The rating remains overweight.

GOOG (516.26): Google estimates increased at Goldman Sachs: The firm notes increasing spending by Google since June and raises estimates for 2009-11 for revenues and EPS; 6-month target increased to $585 from $560. The rating remains Conviction Buy. Deutsche Bank also raised their price target to 580 from 475.

INTC (20.17): Barron's Technology Trader looks towards Intel's (INTC) upcoming earnings release: Intel has rallied strongly on the improving conditions and raised outlook of the company. But to really make an impression with this week's earnings release, the company will have to show investors that the recent positive developments will continue into the seasonally weak Q1. Bulls see a positive in the coming release of Windows 7 and a possible PC upgrade cycle. But Microsoft CEO Ballmer said he is not anticipating a major surge in PC purchases from the OS release. Some analysts fear the current surge for chip makers is from catching up when orders were cut too far and double ordering over fears of shortages from reduced capacities. Barclays suggests switching into defensive chip names like ALTR and XLNX.

IBM (125.93): BMO Capital raises their estimate on IBM ahead of the quarter. “We believe IBM has the opportunity to post some revenue upside in the next few quarters (more likely the December quarter), helped by a gradually improving macro backdrop as well as FX, and continue to move EPS estimates higher. We are raising our 2010 EPS estimate to $10.80 from $10.65 (Street at $10.74), though not making any changes to our 2H09 estimates. We note that a change to non-GAAP would raise EPS by $0.25-$0.30 in 2010.”

BX (14.85): Blackstone Group to list up to eight companies, sell five others over next year - FT Alphaville: The brief writeup cites a letter sent to investors by Blackstone founder Steve Schwarzman 9-Oct. Recall the Independent on Sunday has written recently about the possibility of Blackstone's listing Merlin Entertainments Group and Hilton Hotels.

MA (214.42): V (72.94): Credit Suisse upgrades MA, V: MasterCard (MA) upgraded to outperform from neutral, target raised to $255 from $210. Visa (V) upgraded to outperform from neutral, target raised to $84 from $70.

FCX (74.34): Freeport-McMoRan to consider reinstating dividend as cash flow grows – Bloomberg:FCX CEO Richard Adkerson said in an interview in London that the company will consider reinstating its dividend as its cash flow increases.

Option grants to top executives while takeovers are being negotiated catching regulators' eyes – WSJ: Experts say the practice appears to be legal, and it usually means the executives end up with a higher payout when a deal is subsequently announced. Whether executives are unethically profiting from insider information or, rather, getting incentive to entertain takeover bids that benefit all shareholders is a subject of debate. The article looks at the following specific cases: Omniture (OMTR)'s takeover by Adobe (ADBE), Marvel Entertainment (MVL)'s takeover by Disney (DIS), Teppco Partners (TPP)'s takeover by Enterprise Products (EPD), Compass Bancshares's takeover by Banco Bilbao Vizcaya (BBVA.SM), and Electronic Data Systems's takeover by Hewlett-Packard (HPQ). Executives at the target companies tend to receive seven or eight figures worth of windfall from the options in question, though the specific cashing-out systems vary.

Wednesday, October 7, 2009

October 7, 2009: Morning Call

October 7, 2009: Morning Call

Fair Value: SP500 – 1051.09; NDX: 1703.76; DOW: 9678.20

Technical Levels:

SPX: 875-880, 910, 953, 986, 1003 support/ 1048, 1110 resistance


Pre-market EPS: COST (.76/22.26B); FDO (.41/1.84B); HELE (.39/160.7M); MON(.01/1.9B)
05:00: Euro-zone GDP (Q2 Final): -0.1% QoQ; -4.7% YoY
05:00: Euro-zone Household Consumption (Q2 Final): 0.2% QoQ
06:00: German Factory Orders (August): 1.1% MoM; -20.0% YoY
08:30: MON earnings call
10:30: DOE Crude Oil and Gasoline Inventories
11:00: COST earnings call
11:30: ADBE Analyst Meeting
13:00: ORCL Annual Meeting
13:00: Treasury auctions 20 billion of 10-year notes
15:00: US Consumer Credit (August): -10.0B
16:00: Select Retailers release September Same-Store Sales
Post-market EPS: AA (-.12/4.58B); RT (.09/295.0M)

Foreign Market Summary/Key Macro News/Commentary:

Equity futures are trading flat with fair value at 7:30am ET. Asian markets surged overnight excluding India in response to the strong gains in Europe and the United States on Tuesday (Japan up 1.1%, Hong Kong up 2.07%, Australia up 2.27%, South Korea down 0.02%, India down 0.90%). Energy shares rose on oil’s gains, gold miners were higher on record high prices, and banks benefited from broker upgrades. In Australia Brambles (BXB.AU) fell on recent management changes and increased costs coming from a strategy makeover. Steel shares, metal stocks, and trading houses all made gains in Japan. South Korea ended flat after volatile trade. Banks and technology stocks gained but automakers fell on concerns about the won’s strength. India and New Zealand reversed gains as respectively IT and telecom stocks came under selling pressure and as investors took profits in Telecom (TEL.NZ) and Fletcher Building (FBU.NZ). China remained closed for National Day. European markets are down 0.25%, fluctuating between modest gains and losses in the early morning session. Euro-zone GDP came in 1 tick below consensus (down 4.8% YoY vs. street at –4.7%). German Factory Orders for August came in better than expected (1.4% vs. 1.1% MoM) but July was revised lower to 3.1% vs. prior estimate of 3.5%. Sainsbury (SBRY.LN) announced in its Q2 trading statement that like-for-like sales up 5.4% excluding fuel and VAT. Q-Cells (QCE.GR) traded higher on renewed market talk of interest from Siemens (SIE.GR). Lloyds Banking Group (LLOY.LN) downgraded to underperform at Fox-Pitt.

Research Calls/Market Moving News:

AAPL (190.01): Piper Jaffray’s bi-annual Teen Survey results were released last night after the market closed and showed Apple’s lead widening. “Apple's dominance in the CE and online music markets is going seemingly unchecked, capped by market saturation for iPod and iTunes usage. Also, interest in the iPhone remains high. In our most recent survey, those who plan on purchasing an iPhone in the next six months was up to 22%. We believe that the teen demographic is a critical component of long-term growth in the digital music and mobile markets, and Apple is taking its leading position in music and mobile markets. iPhone Interest Solid, $99 iPhone Appears Meaningful For Share Gains. In our spring-09 survey (before the $99 iPhone 3G was available), 8% of students surveyed owned iPhones and an additional 16% expected to buy an iPhone in the next 6 months. In our most recent survey, the iPhone's share amongst teens rose to 15%, and interest was up to 22% planning on purchasing an iPhone in the next six months. We believe the $99 iPhone 3G has been a meaningful part of share gains in the last six months. Previously, teens were indicating that the plan pricing and handset pricing were too high for them (and their parents) to buy iPhones. The lower pricing appears to have been a catalyst for share gains. Also, the popularity of the App Store and the quality of games available for the iPhone have likely led to the gains among the teen demographic in recent months.” Reiterate Overweight and 235 target.

COST (57.93): Costco reports Q4 EPS $0.85 vs Reuters $0.77: Company reports revenues of $22.38B vs Reuters $22.27B. US comps were (6%); international comps (3%); total comps (5%). US comps (excluding the impact from gasoline deflation) were (1%); international (excluding the effects of foreign exchange) +7%; total comps (excluding aforementioned effects) +1%. Q4 results benefited from a $0.02/share LIFO credit, and were adversely impacted by previously reported factors including on-going softness in US sales, higher employee benefit costs, and lower US dollar amounts of international profits as a result of weaker foreign currencies.

BAC (17.00): Bank of America upgraded to outperform from market perform at Wells Fargo: Valuation range increased to $24-$27 from $14-$16. Firm believes BAC’s potential share price appreciation compared to “normalized” EPS is the strongest of their coverage universe.

GOOG (498.74): Google's target increased at Oppenheimer: Shares are rated outperform and the target is increased to $565 from $490. Following conversations with a leading PPC vendor and recently released paid click data, the firm expects GOOG to report better than expected 3Q results on 15-Oct after the close. Oppenheimer believes paid clicks and pricing have improved vs. 2Q, and that advertisers are less focused on ROI, instead looking to drive higher sales and market share.

CSCO (23.35): Cisco Systems upgraded to outperform from market perform at William Blair

VALE (23.87): Companhia Vale do Rio Doce (CVRD) upgraded to buy from neutral at Goldman Sachs -- Bloomberg ($23.87)

YUM (34.86): YUM! Brands reports Q3 EPS $0.70 ex-items vs Reuters $0.58, raises f09 EPS guidance to $2.14 vs prior guidance $2.10, Reuters $2.12, FC $2.13.

Fed is concerned about banks' sluggishness in taking losses on commercial real-estate loans – WSJ: A 29-Sep presentation suggests the Fed fears a repeat of the housing-related losses that have recently hit banks. WSJ analysis shows banks with heavy exposure to commercial real-estate loans have only set aside $0.38 in reserves for every $1 in bad loans, vs $1.58 in reserves for every $1 of bad loans at the beginning of 2007. Recall CNBC reported 16-Sep that the Fed had undertaken a broad review of commercial-real-estate exposure at the largest regional banks.

Cable/Satellite sector upgraded to overweight at Wells Fargo: Firm sees the most upside for Time Warner Cable (TWC), followed by Comcast (CMCSA) and then Cablevision (CVC). TWC upgraded to outperform from market perform. Valuation range increased to $50-54 from $30-33.