Tuesday, August 4, 2009

August 4, 2009: Morning Call

August 4, 2009: Morning Call

Fair Value: SP500 – 999.71; NDX: 1627.19; DOW: 9242.49

Technical Levels:

SPX: 832, 875-880, 910, 953 support/ 1002, 1044 resistance


Pre-market EPS: AYE (.43/867.0M); ADM (.44/15.2B); CAM (.47/1.2B); EMR (.57/5.3B); HCP (.51/249.2M); HNT (.52/3.9B); HSIC (.76/1.6B); ICE (1.13/242.9M); MLM (.77/471.0M); PTRY (.45/1.6B); SPG (1.37/878.5M); VNO (1.09/608.8M);DHI (-.23/774.5M): UBS(na/na)
03:00: UBS earnings call
05:00: Euro-zone PPI (June): -6.6% YoY; 0.2% MoM
08:30: Personal Income (June): -1.0%; Personal Spending: 0.2%
08:30: PCE Core (June): 0.2% MoM; 1.7% YoY
08:30: ICE earnings call
08:30: CAT analyst meeting
08:30: PHM earnings call
09:30: Fed’s Tarullo testifies on bank regulation
10:00: Pending Home Sales (June): 0.6%
11:00: DHI earnings call
11:00: SPG earnings call
16:30: API Crude Oil and Gasoline Inventories
17:00: CEPH earnings call
17:00: ABC Consumer Confidence
Post-market EPS: CEPH (1.30/540.2M); DVA (.95/1.4B); ERTS (-.14/727M); KFT (.54/10.3B); NWS (.18/7.6B); ONXX (.14/57.4M); BID (.28/153.2M); WFMI (.19/1.8B); AUY (.09/299.0M)

Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 7 points below fair value and the NASDAQ futures are trading 13 points below fair value at 7:30am ET. Asian markets closed mixed (Japan up 0.22%; Hong Kong down 0.05%, Australia up 1.08%, Shanghai down 0.01%, India down 0.59%). European markets are down 0.75% to 1.1% near the lows of the session. Basic material, financial, and energy stocks are leading the decline with losses of 1.5% to 3%. The dollar is modestly higher and commodity prices are down 1% across the board. Jun Personal Income and Spending will be reported at 8:30 ET. Jun Pending Home Sales at 10:00 ET. Fed Reserve Gov Tarullo testifies at Senate panel at 09:30 ET.

Research Calls/Market Moving News:

HGSI (14.25): Think Equity upgrades the shares to buy and raises the price target to 26 a share (price target is the highest among Wall Street analysts). “We spent the past few days evaluating our model for Benlysta and conclude that our estimates are just too conservative. We believe BLISS-76 will, more likely than not, confirm the results seen in BLISS-52. Based on a revised model, we raise our price target to $26 per share, which justifies a raise of our rating to Buy. The result of these changes triangulating an EPS, sum-of-the-parts, and FCFF model points to $26 per share. At first blush, we are surprised by the numbers, but what we must recognize is that Lupus is an unmet medical need and Benlysta is essentially a benign drug that has shown itself to be active, and therefore helps patients. Given the marketing power of Glaxo, we believe that patient awareness will grow rapidly and that physicians will prescribe it. Primary research conducted by the company points to a medical community that is very aware of and willing to use Benlysta. These assumptions point to Benlysta's potential to be a $2.7 billion dollar drug and may eventually prove to be conservative, in our view. We also factor into our model that Human Genome Sciences has raised $357 million with a stock offering, issuing approximately 26M shares at $14 per share. We believe this offering is prudent, and that it strengthens the company's balance sheet, where convertible debt has been an overhang. We have revised our model to reflect the higher share count.”

UBS (15.46): UBS reports Q2 EPS (CHF 0.39) vs Bloomberg (CHF 0.22) and previous quarter (CHF 0.57): Results include an own credit charge of CHF 1.21B, restructuring charges of CHF 582M and a goodwill impairment charge of CHF 492M related to the announced sale of UBS Pactual. Excluding the own credit, goodwill impairment and restructuring charges, operational profit before tax would have been CHF 971M. Company reports revenues CHF 5.77B vs Bloomberg CHF 6.47B and previous quarter CHF 4.97B. UBS shares are trading down 8%.

EMR (36.42): Emerson (EMR) reports Q3 EPS $0.56 vs Bloomberg $0.57, guides FY EPS to $2.20-2.30 vs prior $2.40-2.60 and Reuters $2.30. Q3 revenues were also light at 5.1 billion vs. street at 5.3 billion.

STEC (35.50): Company reports solid earnings and guides Q3 above consensus. But, insiders have filed to sell 7.5 million shares of stock via a secondary.

CAT (45.12): Bank of America raises their price target to 52 from 45.

ADM (30.39): Archer-Daniels reports Q4 EPS $0.10 vs Reuters $0.44: Company reports revenues of $16.53B vs Reuters $15.24B. ADM notes that it see signs of improving demand in the various food, feed and fuel markets its serves.

CVS (34.00): CVS Caremark reports Q2 EPS $0.65 ex-items vs Reuters $0.64: Company reports revenues of $24.87B vs Reuters $24.44B. Guides full year EPS to $2.59-2.64 vs prior $2.55-2.63 and vs Reuters $2.52.

Fed to strengthen examinations of banks' lending practices, financial health with teams of experts – Bloomberg: In testimony prepared for a Senate Banking Committee hearing tomorrow, Fed Governor Daniel Tarullo outlines the step, which builds on the stress tests carried out earlier this year. The teams will assess operations, risks, and risk-management activities; the experts will come from different disciplines. Tarullo says the Fed will soon release guidance on compensation practices that it approves of, and that General Electric (GE) and companies that already own finance arms or industrial-loan businesses should be able to keep them without the Fed's overseeing their non-bank operations. A person familiar with the matter says that on 31-Jul, Treasury Secretary Timothy Geithner used strong language to tell regulators including FDIC chairman Sheila Bair to stop campaigning against the administration's revamping rules for the industry.

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