Thursday, January 29, 2009

January 29, 2009: Morning Call

January 29, 2009: Morning Call

Fair Value: SP500 – 871.12; NDX: 1235.70; DOW: 8333.87

Technical Levels:

SPX: 752-755, 800, 816, 848 support/899-908 resistance


Pre-market EPS: AN (.11/3.12B); BDK (.72/1.39B); BLL (.60/1.72B); CL (.97/3.69B); AMB (.60/153.2M); EQT (.51/241.3M); ETH (.22/193.3M); FO (.87/1.87B); HOT(.37/1.40B); IP (.22/6.71B); ITW (.48/3.63B); MMM (.93/5.55B); OXY (1.02/5.02B); OXPS (.36/63.2M); SI (1.03/3.06B)
05:00: Euro-zone Business Climate Indicator (Jan): -3.5
05:00: Euro-zone Consumer Confidence (Jan): -31
05:00: Euro-zone Economic Confidence (Jan0: 65.4; Industrial: -34; Services: -18
08:30: Durable Goods Orders (Dec): -2.0%; Ex-Transportation: -2.5%
08:30: Initial Jobless Claims
08:30: DFS business update call
10:00: New Home Sales (Dec): 400,000; -1.7% MoM
10:30: EIA Natural Gas Storage Change
11:00: SHWB Investor Update Call
11:00: DHI Annual Meeting
16:30: SPWRA earnings call
17:00: AMZN earnings call
Post-market EPS: AMZN (.41/6.45B); BRCM (.26/1.07B); CB (1.52/2.98B); CX(.19/4.78B); EMN (.45/1.52B); JNPR (.32/937.7M); KLAC (-0.06/401.1M); MWW(.26/309.9M); PKI (.42/516.2M); SPWRA (.58/399.2M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points below fair value while the NASDAQ futures are trading 12 points below fair value at 7:30am ET. Futures are lower due to weakness in European markets, which are currently down 1.3%. The House passed the 819 billion dollar stimulus package without a single Republican vote. European markets are being lead lower by mining stocks and UK banks. Xstrata is down 9% after the company said they will raise capital. The major indices extended their declines with economic data providing little support. Decliners on the FTSE 100 lead advancers 9-1. Asian markets closed higher (Japan up 1.8%, Hong Kong up 4.58%, Australia up 0.88%, India down 0.25) due to strength in the European and US markets in Wednesday’s session.

Impact Research Calls/Market Moving News:

Next round of bank bailout could cost $1-2T – WSJ: People familiar with the matter say the Obama administration could announce plans within days but has not yet figured the exact shape of its new proposal, which will seek to fix banks without owning them. A national bad bank could be seeded with $100-200B of TARP money, with the balance coming from selling government-backed debt or borrowing from the Fed. The government is also considering purchasing banks' common rather than preferred stock, or buying convertible bonds. There is also discussion of insuring some assets against further losses, as the government did with Citi (C) and Bank of America (BAC).

Administration works on financial repair but details are elusive – NYT: New York Times article highlights all the open questions surrounding the bad bank aggregator plan that is being debated in Washington. “Federal officials are trying to find a delicate balance between stabilizing banks and keeping the nation’s finances steady. Mr. Summers privately expressed concern last week that spending too much to buy bad assets could cripple the dollar, according to a person who spoke with him. Administration officials are also worried that lawmakers might reject the high price tag. At the same time, spending too little may not provide enough to plug the deepening hole. “None of the solutions are very easy,” Mr. Schumer said. “All of these proposals sound very appealing until you start to examine them in detail. And then you find that all of them have problems. The good bank-bad bank idea — the problem, first and foremost, is how do you value the assets? No one knows how to do that.” One version of the plan being floated by bankers would have the F.D.I.C. take the lead in running the “bad bank” and buying the toxic assets for a combination of cash and notes backed by the bad bank. In return, the government would demand some sort of equity stake. The banks would still be responsible for collecting payments on the loans that they sold, according to bankers briefed on the situation. Other issues still need to be resolved, including how the government would determine what to pay for the toxic assets, which assets would qualify, and what conditions might be attached. Also under discussion was whether to require banks that dump their assets into the fund to separately raise private capital. That could put pressure on weaker banks”

WFC (21.19): Wells Fargo's Q4 disclosure leaves something to be desired – WSJ: In a "Heard on the Street" column, the Journal notes that Wells Fargo made no mention of its tangible common equity when it reported its Q4 earnings on Wednesday. The paper adds that the bank's TCE looks unsustainably low at an estimated 2.68% of its assets, after acquiring purchasing Wachovia last year. This figure is well below JPMorgan's 3.83% and nearly 5% at Goldman, and more in line with BofA's 2.6%. According to the article, Wells would need an extra $15B of common equity to get its TCE ratio to JPMorgan's ratio. The article goes on to express concern about the lack of disclosure surrounding the performance of Wells's pre-merger loans and whether the bank has adequately reserved for them.

QCOM (36.82): Qualcomm provides Q2 and fiscal 2009 guidance, lowers handset guidance: Guides Q2 revenues to $2.25-$2.45B vs Reuters $2.42B; First Call $2.41B. Guides f09 revenues to $9.3-$9.8B, below prior $10.2-$10.8B, vs Reuters $10.27B. Q2 operating income guided to $0.75-$0.85B. Q2 (March): MSM shipments targeted at 60-65M and CDMA/WCDMA (shipped in Dec qtr) expected 116-121M at an ASP of $207. Fiscal 2009 (Sep): CDMA/WCDMA ASP $202 versus previous $195. Calendar 2009: CDMA/WCDMA units 540-590M versus previous 580-620M, with CDMA at 230M, unchanged from prior and WCDMA at 353M from previous 370M (both CDMA and WCDMA are midpoints). QCOM is not providing an EPS forecast due to the volatility of the financial markets.

MUR (48.27): Murphy Oil reports Q4 EPS $0.83 vs Reuters $0.80: Company reports revenues of $4.43B vs a single estimate of $5.08B. Crude oil and liquids production averaged 129.3K bpd with sales volumes of 140.1K bpd. MUR sees total production in Q1 of 163K Boe/day and sales volume during the quarter of 156K/day. Guides Q1 EPS to $0.20-$0.40 vs Reuters $0.41.

BDK (38.74): BDK slashes Q1 and FY2009 guidance. Q1 guidance is between 5 and 15 cents versus consensus of .79 cents. Sees 2009 EPS of between 1.75-2.25 vs. street at 3.68.

MMM (55.42): MMM reports Q4 EPS that beat by 4 cents (97 cents vs. 93 cents). MMM sees 2009 EPS of 4.30 to 4.70 vs. prior guidance of 4.50 to 4.95. 2009 consensus is 4.36. MMM plans to cut capex by 30% and sees 2009 organic sales volume down 3-7%.

FO (37.96): Fortune Brands reports Q4 EPS $0.68 ex-items vs Reuters $0.86: Company reports revenues of $1.79B vs Reuters $1.90B. Q4 EPS was also adversely impacted by foreign exchange by $0.12/sh. Guides f09 EPS to $2.00-2.50 vs Reuters $3.60.

NYX (23.58): NYSE Euronext downgraded to neutral from buy at Piper Jaffray: Target is lowered to $25 from $39.

PII (23.40): Polaris Industries reports Q4 EPS $1.11 vs Reuters $1.09: Company reports revenues of $523.6M vs Reuters $548.8M. Guides Q1 EPS to $0.15-0.25 vs Reuters $0.47; guides revenues to decline 20-25%, implying sales of $291.6-311.0M vs Reuters $375.8M. Guides '09 EPS to $2.50-3.00 vs Reuters $3.12. Guides '09 revenues to decline 15-23%, implying sales of $1.50-1.66B vs Reuters $1.92B.

CHK (16.75): Chesapeake Energy sells $1B worth of senior notes: The offering was increased from an originally expected $500M. The senior notes, due 2015, were priced at 95.071% of par to yield 10.625%.

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