Thursday, April 23, 2009

April 23, 2009: Morning Call

April 23, 2009: Morning Call

Fair Value: SP500 – 841.15; NDX: 1335.85; DOW: 7850.26

Technical Levels:

SPX: 676, 719, 765, 788 support/869, 898 resistance


Pre-market EPS: ABC (.89/17.5B); AN (.16/2.82B); BDK (.08/1.16B); BLL (.77/1.72B); CME (3.24/663.1M); COP (.42/32.83B); DHR (.74/2.69B); DO (2.23/877.5M); FITB(-.24/1.53B); GR (1.07/1.69B); HSY (.34/1.19B); MAR (.14/2.56B); NOV (1.06/3.31B); NUE(-.57/2.93B); OCY (.41/3.31B); PNC (.42/3.51B); STI (-.58/2.07B); RTN (1.00/5.61B); UPS(.57/11.52B); UNP (.66/3.48B); POT (.83/1.0B)
04:00: ECB Euro-zone Current Account (Feb): -10.7B
04:00: Euro-zone PMI Manufacturing (April): 34.7; Services: 41.2; Composite: 38.9
05:00: Euro-zone Industrial New Orders (April): -2.2% MoM; -34.8% YoY
08:30: Initial Jobless Claims (w/e April 18): 630,000; Continuing Claims: 6.13M
10:00: Existing Home Sales (March): 4.65M; 1.5% MoM
10:30: EIA Natural Gas Storage Change
10:30: PNC earnings call
13:00: POT earnings call
17:30: AXP earnings call
17:30: MSFT earnings call
Post-market EPS: AXP (.12/6.6B), AMZN (.30/4.75B); BIDU (.84/115.9M); BNI (.97/3.66B); CB(1.38/2.90B); CF (1.56/435.1M); EMN (.14/1.34B); FII (.48/303.4M); JNPR (.16/765.1M); KLAC(-.27/300.8M); MSFT (.39/14.18B); WFR (-.02/216.9M); SPWRA (.23/268.57M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 2 points above fair value while the NASDAQ futures are trading 7 points above fair value at 7:30am ET. The futures have sold off a few points after weak earnings from UPS. Aside from earnings, Jobless claims data takes center stage at 8:30. European markets have reversed initial declines of 1.5% and are currently unchanged. Mixed earning reports/trading updates saw Credit Suisse (CGSN.VX), Novartis (NOVN.VX) and Stora Enso (STERV.FH) traded higher while ABB Ltd (ABBN.VX), Akzo Nobel (AKZA.NA), Software AG (SOW.GR) and Schroders (SDR.LN) fell. Deutsche Börse (DB1.GR) is trading up 5% in Germany on reports of a new merger attempt with NYSE Euronext (NYX). France, Germany and EuroZone Apr Preliminary/Advance PMI data was all better than expected. EuroZone Feb Industrial New Orders (34.5%) y/y vs con (34.8%). The pound and euro are higher against the dollar on the better economic data. Asian markets closed higher (Japan up 1.4%, Hong Kong up 2.2%, Australia up 2.04%, India up 2.93%). Technology stocks were strong across the region following strong earnings from AAPL and EBAY. India’s Sensex rallied the most in three weeks on short covering and strength in technology. Japan reversed early losses due to strength in automakers following an upgrade by Goldman Sachs.

Research Calls/Market Moving News:

AAPL (121.51): Piper Jaffray’s Gene Munster reiterates buy rating and 180 target. “Solid Mar. Qtr Results Despite Economic Headwinds. GAAP results of $1.33 on $8.16b vs. Street estimates of $1.09 on $7.9b were driven by outperformance in all three core business: Mac, iPhone, and iPod. Significant margin expansion was driven by favorable commodity costs and inventory management. iPhone, Mac & iPod Units Exceeded Street Expectations. March quarter Mac units of 2.22m were slightly above Street at 2.1m. iPhones were also strong with 3.79m units vs. the Street at 3.3m. Apple sold 11.01m iPhones in the March quarter, above Street consensus (10.0m). The key takeaway is that the challenging consumer spending environment is not impacting Apple to the degree that the Street expected it to. Our Thoughts On iPhone In CY09. Our confidence in the iPhone platform is unchanged. We see the strong outperformance of iPhone as an indicator that consumers are still attracted by the value proposition of the iPhone: a robust app ecosystem adding many new features and games, an enjoyable mobile web experience, and a core strength of mobile media. Significant growth of iPod touch units also confirms the strength of the app ecosystem, and Apple's mobile software. We continue to expect a family of iPhones this summer, as early as June. Moreover, Apple indicated that the iPhone would launch in China in the next 12 months, but we believe it could be as soon as the end of the summer. An Update On Steve Jobs' Return To Apple. Apple continues to expect the return of Steve Jobs by the end of June. Until then, it appears that day-to-day operations at Apple are running smoothly. We believe Jobs may return to Apple with a reduced role, possibly as Chairman, with COO Tim Cook assuming the CEO position. Regardless, we think the transition of leadership during and after Jobs' leave of absence will not negatively impact Apple's business. Gross Margin Exceeds Expectations, Seen Declining. Gross margin of 36.4% in March exceeded guidance of 32.5% by 390bps. The company guided to 33% margin for June. Apple also reiterated its expectation of "about 30%" in the Sept. quarter, in-line with previous comments indicating a GM of "about 30%" in 2HFY09. While some investors believe this decline in GM may be due to a low-cost portable in the Sept. quarter, we believe Apple was simply reiterating the original guidance.”

AAPL (121.51): Apple upgraded to outperform from underperform at RBC Capital: Target increased to $165 from $95.

UPS (54.75): UPS reports Q1 earnings of 52 cents vs. street of 56 cents. UPS guides Q2 EPS to between .45-.55 cents vs. street of .66 cents. Company cites the weak economy. The S&P futures have sold off 4 points on the UPS headlines.

EMC (12.70): EMC reports Q1 EPS $0.16 ex-items vs Reuters $0.16
Company reports revenues of $3.15B vs Reuters $3.25B. Due to the current macro-economic conditions and limited visibility, EMC is not offering revenue, EPS or other financial outlook at this time.

Banks to get preliminary stress-test results tomorrow at their local Federal Reserve Banks – NYT: By calling all the banks in, officials are taking steps to eliminate the stigma that would be attached to recipients if only a few were given results early. People briefed on the sessions say the banks will have until 28-Apr to dispute any findings. The final results are still planned to be announced 4-May; officials expect the banks to release their own results. The preliminary findings are unlikely to be disclosed, because federal law makes bank exams confidential

NYX (20.56): Deutsche Börse trading higher on reports of new merger attempt with NYSE Euronext (NYX) – Reuters: Deutsche Boerse has no immediate comment on Nyse Euronext merger talks report

BG (54.50): Bunge Ltd reports Q1 EPS ($1.76): Unclear if EPS is comparable to Reuters $0.69. Company reports revenues of $9.20B vs Reuters $10.43B. Volumes totaled 32.3 metric tons vs year-ago 31.8. Guides full year EPS to $4.90-5.40 vs prior $6.90-7.60 and Reuters $6.48

POT (80.99): Potash reports Q1 EPS $1.02 vs Reuters $0.82: Company reports revenues of $922.5M vs Reuters $857.8M. Guides Q2 EPS to $1.10-1.50 vs Reuters $1.92. Guides full year EPS to $7.00-8.00 vs Reuters $9.33. Given the lower sales volumes POT anticipates through at least H1 of 2009, which led the company to announce potash production curtailments to date in 2009 of 3.5M tonnes, POT now estimates full-year potash gross margin to be in the range of $2.5B-$3.0B and total shipments to be around 6M tones.

VMW (32.50): VMware reports Q1 results; says Q2 revenue may be "flat, or even down" y/y: Management says they expect customers will continue to keep a very tight rein on IT spending; they also note the vSphere 4 transition and say that as a result of these factors: "we expect our second quarter revenues will be flat, or even down, compared to the second quarter of 2008. VMW shares are trading down 17% in the pre-market.

BRCD (4.97): Brocade upgraded to buy from hold at Jefferies: Target is $6

DO (71.12): Diamond Offshore reports Q1 EPS $2.51 vs Reuters $2.21: Company reports revenues of $885.7M vs Reuters $878.3M. Dayrates were as follows: High Specification Floaters $360 with 80% utilization. Intermediate Semis $283 with 85% utilization. Jack-ups $131 with 73% utilization.

BIDU (208.33): Baidu estimates raised above consensus at RBC: The firm has raised their Q1 revenue estimate to $119M from $115M vs. Reuters $115.78. RBC believes estimates will move higher following the quarter. Target is raised to $252 from $186. Shares remain outperform rated. BIDU reports tonight.

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