June 30, 2009: Morning Call
Fair Value: SP500 – 923.59; NDX: 1483.26; DOW: 8477.54
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Last Trading Day in Q2
Pre-market EPS: SCHN (.11/382.6M)
09:00: S&P/Case Shiller Home Price Index (April): -18.75% YoY
09:00: BBBY Annual Meeting
09:45: Chicago Purchasing Manager (June): 38.5
10:00: US Consumer Confidence (June): 55.1
10:00: AIG Annual Meeting
12:00: Fed’s Bullard speaks on exit strategies
16:10: Fed’s Hoenig speaks on a topic to be determined.
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
21:00: Chinese Manufacturing PMI (June): 53.1
22:30: Chinese CLSA Manufacturing PMI (June): 51.2
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are both trading flat with fair value at 7:30am ET. Asian markets closed mixed (Japan up 1.79%, Hong Kong down 0.81%, Australia up 1.75%, Shanghai down 0.42%, India down 1.97%). The WSJ reported that Shinsei Bank (8303.JP) and Aozora Bank (8304.JP) are expected to announce on Wed their plan to merge. In China, Hebei Iron and Steel head says hoping to win more than 33% price cut in iron ore talks. Australian retailer David Jones (DJS.AU) jumped after upgrading its profit guidance for the FY after it experienced improved trading conditions in May and June. European markets are flat to down 0.25% in a range-bound session. European markets weakened following the release of a weaker final revision to Q1 UK GDP (-2.4% vs. –2.1% consensus). Decliners on the FTSE 100 lead advancers 3-2. BG Group (BG.LN) announced it'll acquire a 50% interest in 120k net acres and related and complementary gas-gathering and transportation assets from EXCO Resources (XCO) for a total approx $1.3B.
Research Calls/Market Moving News:
FCX (50.33): Freeport-McMoRan upgraded to buy from hold at Canaccord Adams: Target increased to $61 from $40.75. Firm notes an increase in copper price forecasts for '09/'10/'11.
AMZN (83.03): Amazon.com upgraded to outperform from neutral at Cowen & Co.
UBS Equity Strategy increases allocation in Financials to a modest overweight from neutral.
GS (149.36); JPM (34.60); MS (29.10); STT (48.50): UBS resumes coverage of financials GS, JPM, MS, C, and STT: Goldman Sachs (GS) resumed buy; target is $175. Citigroup (C) resumed neutral, firm says shares are a short term buy; target is $3.25. JPMorgan Chase (JPM) resumed neutral; target is $37. State Street (STT) resumed neutral; target is $49.
FDX (55.63): FedEx upgraded to overweight from equal-weight at Barclays Capital:
Target remains $71. The stock is the firm's top pick within the transportation sector.
GERN (6.69): GE Healthcare and Geron reach an agreement to share intellectual property rights for embryonic stem cell products. GERN shares are up almost 30% on the news.
APOL (65.99): Apollo Group reports Q3 EPS $1.26 vs Reuters $1.12: Company reports revenues of $1.05B vs Reuters $1.04B. Apollo Group mentioned positively at RBC: The firm believes the quarterly results will lead to upward earnings revisions and perhaps upgrades of the shares based on expectations for increased future profitability. RBC says comments during the company conf. call have positive implications for the rest of the sector from both a financial and regulatory standpoint. Shares of APOL remain sector perform rated. APOL shares are trading up 5% in pre-market trading.
Securities firms on the verge of closing most profitable quarter since the credit crisis began – WSJ: The Journal highlights some of the favorable developments, noting that according to Dealogic, the debt market saw $1.5T of global issuance in Q2 (just slightly below the level seen in Q1), while equity offerings reached nearly $26B, four times the amount recorded in Q1 and the highest since Q2 of 2008. The article also notes that spreads between bid and offer prices on fixed-income assets remained wide through much of Q2, a dynamic that helped to boost trading revenues.
FT discusses stalemate in iron ore talks: The FT reports that amid a stalemate in tense talks with Chinese steelmakers over a new iron ore supply deal, Rio Tinto has threatened to sell its iron ore into the spot markets if the parties are unable to reach an agreement on Tuesday. The paper notes that negotiations have been complicated by the fact that iron prices have jumped to their highest levels in four months, above the annual benchmark level at which the world's biggest miners struck deals with steelmakers elsewhere in Asia. Recall that the three mining companies - Rio Tinto, Vale and BHP Billiton - agreed to cut annual benchmark iron ore prices by 28%-33% for deliveries to steelmakers in Japan, South Korea, Taiwan and Europe. However, the China Iron and Steel Association (Cisa), Beijing’s negotiator, has rejected those cuts and is looking for 40-45% reduction in prices.
F (5.78): Ford guides Q3 production to 485K vehicles vs previous 460K –wires: Headlines crossed just before the close. Represents a 16% y/y increase compared to previous guidance for +10%
NCI Journal article questions cancer drugs' cost -- WSJ : The authors of the article published in the National Cancer Institute found that use of Erbitux, which costs $80K for an 18-week regiment, only prolongs survival by 1.2 months. Using that estimate and extrapolating those costs to extending the lives of 500K Americans who die of cancer annually by one year could cost $440B. The article also questions the cost of Avastin (ROG.VX, PDLI) and Nexavar (BAY.GR, ONXX) and is seeks changes in the testing and practice of medicine. The pharmaceutical companies says the article exaggerates the overall costs of the treatments as few patients are on them for extended periods.
Tuesday, June 30, 2009
Monday, June 29, 2009
June 29, 2009: Morning Call
Fair Value: SP500 – 915.24; NDX: 1479.73; DOW: 8385.67
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
04:00: Euro-zone Consumer Confidence (June): -30; Economic Conf: 71.0
04:00: Euro-zone Industrial Confidence (June): -32
08:30: Chicago Fed. National Activity Index (May): 33.10
17:00: APOL earnings call
Post-market EPS: APOL (1.12/1.04B); HRB (2.05/2.5B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are both trading 2 points above fair value at 7:30am ET. The futures are trading 10 points above the overnight session low (907.40) in very light volume. Asian markets closed lower (Japan down 0.95%, Hong Kong down 0.39%, Australia down 0.43%, Shanghai up 1.65%, Taiwan down 1.1%, India up 0.14%). Japanese Industrial production came in weaker than expected (5.9% vs. consensus 7.0%). Daiwa Securities (8601.JP) fell after announcing a $2.5B share sale and Mizuho Financials (8411.JP) also traded lower on talk of share sale. European markets quickly reversed small opening declines and are currently trading up between 0.50% and 1.2%. Euro-zone confidence numbers came in stronger than expected. Deutsche Telecom is up 2.5% on chatter that VOD is considering a bid for DT’s UK wireless division. ELN traded up as much as 8% before pulling back on chatter that NVS is in talks to buy part of the Elan. Reports are saying that an agreement is “some way off.”
Research Calls/Market Moving News:
AAPL (142.44): Collins Stewart says iPhone shipments are well ahead of consensus, according to their channel checks. “ Final June Production Well Above Our Prior Estimate Our AAPL supply chain checks indicate that total iPhone production (3G/GS) for the June quarter will come in close to 7 million or well above our earlier near consensus expectations of 4.6 million. The late ramp was attributed to production bottlenecks. Legacy 3G iPhone shipments would have increased over 15% sequentially to 4.4 million and the residual 2.4 million representing 3GS shipments. Overall shipments are almost 2x the levels in the June quarter. Conservative Production Forecast: AAPL current iPhone production forecast for the September quarter calls for total unit shipments to modestly exceed 6 million units. This would be a high single digit decline both sequentially and year-on-year. If these production levels hold, it would represent modest sequential increase for the 3GS phones and a 15% decline for the 3G platform. It appears that AAPL will sunset the legacy platform by year end. n Model iPhone contributes to about a fifth of top-line revenues. An incremental 2+ million iPhone shipments translates to an additional $150 million based on subscription accounting, or a 2% upside, to our revenue estimate of $8.1billion.
WSJ says PPIP has lost momentum and shows the difficulty of getting the bad debt off the banks' balance sheets: Cites the well known causes: "Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits." Some officials say the banking environment has improved and there is not as much of a need for the program, as demonstrated by the recent capital raisings. The FDIC effectively ended the prong that would buy bad bank loans earlier this month while investors are reluctant to participate in the effort to buy troubled securities. Some claim that the announcement of the program generated the confidence to allow the bank to raise private capital.
AAPL (142.44): Barron's Follow Up is still positive on Apple: The shares are trading for 25x forward earnings compared to a 5 year average of 30x. Bernstein Research's Toni Sacconaghi has a target of $155 and believes the near term performance will be good enough to merit a higher stock price. COO Cook has performed ably while CEO Jobs was absent for medical reasons.
AAPL (142.44): NY Times notes the popularity of gaming on the Apple iPhone: Games are the largest section of the App Store and the largest number of downloads. The gaming industry is starting to pay attention to the casual gamers who use the iPhone to play, about 79% of iPhone users have downloaded games vs 31% for smartphone users in general. Electronic Arts is now bringing titles to the iPhone, including some of the bigger franchises. Some developers say the sophisticated level of play possible is starting to cut into the market of devices like the PSP and DS.
GOOG (425.32): Google argues size shouldn't matter because it is a click away from obsolescence reports the NY Times: Google is waging a public relations campaign to convince regulators and lawmakers that despite its size, Google is still vulnerable to competition and industry disruptive technologies. Google has not been accused of anticompetitive practices but is involved in three separate governmental investigations and some analysts say government opposition is the biggest threat to the company's continued success.
DELL (13.68): Bernstein comments on Dell, acquisition strategy: The firm believes DELL is focused on acquiring small to medium sized enterprise related companies with strong margin profiles and higher levels of recurring revenues and says a PC or consumer/handset related acquisition appears unlikely. Bernstein does believe DELL should consider a deal to acquire another PC company with Acer mentioned as a possibility. A large acquisition in the services area such as CSC or ACN is seen as highly unlikely though Perot (PER) could make sense. With regard to the storage area, Compellent (CML) and CommVault (CVLT) are both seen as appropriate targets.
STT (48.33): State Street receives Wells notice from SEC: On 25-Jun, the staff of the SEC provided State Street Bank and Trust Company, State Street's principal subsidiary, with a “Wells” notice. The notice relates to an ongoing SEC investigation into disclosures and management by State Street Global Advisors of certain active fixed-income strategies during 2007 and prior periods. The Wells notice informs State Street that the SEC staff intends to ask the SEC Commissioners for permission to bring a civil enforcement action for possible violations of the securities laws.
Barron's summaryCover: Examination of the asset allocation of the large university endowments. Interview: Joe Dear, chief investment officer of Calpers, is counting on a 7.75% rate of return long term. Lead Articles: Wendy’s/Arby’s Group (WEN) looks worth buying after a recent selloff; Henry Schein (HSIC) and Patterson (PDCO) look overextended; cautious near term on Asia; Other Voices is a contribution from Joe Queenan; Editorial questions the wisdom of the proposals for increased regulating of the financial markets. Columns: The Trader is cautious on the markets and dollar, looks at potential commodity M&A and is positive on Accenture (ACN); Commodities Corner says corn bulls may suffer if not as much farmland is left fallow as originally planned and the shift away from corn does not materialize; Current Yield notes the backing away from risk lately and the risk to the larger market if California starts paying obligations with IOUs on 1-July; Asia Trader notes the strength of the Indonesian market; Euro Trader is positive on Allianz (AZ) and AXA Group (AXA); The Striking Price notes the time it takes for a calming of volatility to be priced into longer term options and that some traders are seeking to profit from that; Follow Up is still positive on Apple (AAPL) and packaging stocks; Up and Down Wall Street considers the latest economic and political news; Streetwise notes that if the credit markets are correct, then conditions should remain supportive of stocks generally; D.C. Current notes the secretiveness surrounding the Obama administration's auto task force; Technology Trader criticizes Apple (AAPL) and Palm (PALM) for their lack of candor, Apple about CEO Jobs' health and Palm about sales of the Pre; Plugged In notes the attack of NetSuite (N) against SAP (SAP) on SAP's home territory with the coming release of NetSuite's applications for German companies and others doing business in that country.
Fair Value: SP500 – 915.24; NDX: 1479.73; DOW: 8385.67
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
04:00: Euro-zone Consumer Confidence (June): -30; Economic Conf: 71.0
04:00: Euro-zone Industrial Confidence (June): -32
08:30: Chicago Fed. National Activity Index (May): 33.10
17:00: APOL earnings call
Post-market EPS: APOL (1.12/1.04B); HRB (2.05/2.5B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are both trading 2 points above fair value at 7:30am ET. The futures are trading 10 points above the overnight session low (907.40) in very light volume. Asian markets closed lower (Japan down 0.95%, Hong Kong down 0.39%, Australia down 0.43%, Shanghai up 1.65%, Taiwan down 1.1%, India up 0.14%). Japanese Industrial production came in weaker than expected (5.9% vs. consensus 7.0%). Daiwa Securities (8601.JP) fell after announcing a $2.5B share sale and Mizuho Financials (8411.JP) also traded lower on talk of share sale. European markets quickly reversed small opening declines and are currently trading up between 0.50% and 1.2%. Euro-zone confidence numbers came in stronger than expected. Deutsche Telecom is up 2.5% on chatter that VOD is considering a bid for DT’s UK wireless division. ELN traded up as much as 8% before pulling back on chatter that NVS is in talks to buy part of the Elan. Reports are saying that an agreement is “some way off.”
Research Calls/Market Moving News:
AAPL (142.44): Collins Stewart says iPhone shipments are well ahead of consensus, according to their channel checks. “ Final June Production Well Above Our Prior Estimate Our AAPL supply chain checks indicate that total iPhone production (3G/GS) for the June quarter will come in close to 7 million or well above our earlier near consensus expectations of 4.6 million. The late ramp was attributed to production bottlenecks. Legacy 3G iPhone shipments would have increased over 15% sequentially to 4.4 million and the residual 2.4 million representing 3GS shipments. Overall shipments are almost 2x the levels in the June quarter. Conservative Production Forecast: AAPL current iPhone production forecast for the September quarter calls for total unit shipments to modestly exceed 6 million units. This would be a high single digit decline both sequentially and year-on-year. If these production levels hold, it would represent modest sequential increase for the 3GS phones and a 15% decline for the 3G platform. It appears that AAPL will sunset the legacy platform by year end. n Model iPhone contributes to about a fifth of top-line revenues. An incremental 2+ million iPhone shipments translates to an additional $150 million based on subscription accounting, or a 2% upside, to our revenue estimate of $8.1billion.
WSJ says PPIP has lost momentum and shows the difficulty of getting the bad debt off the banks' balance sheets: Cites the well known causes: "Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits." Some officials say the banking environment has improved and there is not as much of a need for the program, as demonstrated by the recent capital raisings. The FDIC effectively ended the prong that would buy bad bank loans earlier this month while investors are reluctant to participate in the effort to buy troubled securities. Some claim that the announcement of the program generated the confidence to allow the bank to raise private capital.
AAPL (142.44): Barron's Follow Up is still positive on Apple: The shares are trading for 25x forward earnings compared to a 5 year average of 30x. Bernstein Research's Toni Sacconaghi has a target of $155 and believes the near term performance will be good enough to merit a higher stock price. COO Cook has performed ably while CEO Jobs was absent for medical reasons.
AAPL (142.44): NY Times notes the popularity of gaming on the Apple iPhone: Games are the largest section of the App Store and the largest number of downloads. The gaming industry is starting to pay attention to the casual gamers who use the iPhone to play, about 79% of iPhone users have downloaded games vs 31% for smartphone users in general. Electronic Arts is now bringing titles to the iPhone, including some of the bigger franchises. Some developers say the sophisticated level of play possible is starting to cut into the market of devices like the PSP and DS.
GOOG (425.32): Google argues size shouldn't matter because it is a click away from obsolescence reports the NY Times: Google is waging a public relations campaign to convince regulators and lawmakers that despite its size, Google is still vulnerable to competition and industry disruptive technologies. Google has not been accused of anticompetitive practices but is involved in three separate governmental investigations and some analysts say government opposition is the biggest threat to the company's continued success.
DELL (13.68): Bernstein comments on Dell, acquisition strategy: The firm believes DELL is focused on acquiring small to medium sized enterprise related companies with strong margin profiles and higher levels of recurring revenues and says a PC or consumer/handset related acquisition appears unlikely. Bernstein does believe DELL should consider a deal to acquire another PC company with Acer mentioned as a possibility. A large acquisition in the services area such as CSC or ACN is seen as highly unlikely though Perot (PER) could make sense. With regard to the storage area, Compellent (CML) and CommVault (CVLT) are both seen as appropriate targets.
STT (48.33): State Street receives Wells notice from SEC: On 25-Jun, the staff of the SEC provided State Street Bank and Trust Company, State Street's principal subsidiary, with a “Wells” notice. The notice relates to an ongoing SEC investigation into disclosures and management by State Street Global Advisors of certain active fixed-income strategies during 2007 and prior periods. The Wells notice informs State Street that the SEC staff intends to ask the SEC Commissioners for permission to bring a civil enforcement action for possible violations of the securities laws.
Barron's summaryCover: Examination of the asset allocation of the large university endowments. Interview: Joe Dear, chief investment officer of Calpers, is counting on a 7.75% rate of return long term. Lead Articles: Wendy’s/Arby’s Group (WEN) looks worth buying after a recent selloff; Henry Schein (HSIC) and Patterson (PDCO) look overextended; cautious near term on Asia; Other Voices is a contribution from Joe Queenan; Editorial questions the wisdom of the proposals for increased regulating of the financial markets. Columns: The Trader is cautious on the markets and dollar, looks at potential commodity M&A and is positive on Accenture (ACN); Commodities Corner says corn bulls may suffer if not as much farmland is left fallow as originally planned and the shift away from corn does not materialize; Current Yield notes the backing away from risk lately and the risk to the larger market if California starts paying obligations with IOUs on 1-July; Asia Trader notes the strength of the Indonesian market; Euro Trader is positive on Allianz (AZ) and AXA Group (AXA); The Striking Price notes the time it takes for a calming of volatility to be priced into longer term options and that some traders are seeking to profit from that; Follow Up is still positive on Apple (AAPL) and packaging stocks; Up and Down Wall Street considers the latest economic and political news; Streetwise notes that if the credit markets are correct, then conditions should remain supportive of stocks generally; D.C. Current notes the secretiveness surrounding the Obama administration's auto task force; Technology Trader criticizes Apple (AAPL) and Palm (PALM) for their lack of candor, Apple about CEO Jobs' health and Palm about sales of the Pre; Plugged In notes the attack of NetSuite (N) against SAP (SAP) on SAP's home territory with the coming release of NetSuite's applications for German companies and others doing business in that country.
Friday, June 26, 2009
June 26, 2009: Morning Call
June 26, 2009: Morning Call
Fair Value: SP500 – 916.59; NDX: 1475.37; DOW: 8419.88
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: KBH (-.72/337.6M)
08:30: Personal Income (May): 0.3%; Personal Spending: 0.3%
08:30: PCE Core MoM: 0.1%; PCE Core YoY: 1.8%
10:00: University of Michigan Confidence (June): 69.0
13:00: Fed’s Fisher speaks on the economy
13:00: Baker Hughes US Rig Count
11:30: KBH earnings call
14:00: Fed’s Bernanke gives brief remarks at BLS 125th Anniversary Celebration
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 2 points below fair value while the NASDAQ futures are trading 5 points below fair value at 7:30am ET. Asian markets closed higher following Wall Street’s sharp gains in Thursday’s session (Japan up 0.83%, Hong Kong up 1.78%, Australia up 1.24%, Shanghai up 0.34%, India up 2.92%). Qantas (QAN.AU) cancelled an order for 15 Boeing (BA) B787's and delayed delivery of a further 15 B787's for four years. Suzuki Motor (7269.JP) rose after the Manager Magazin reported yesterday Volkswagen (VOW.GR) was considering taking a stake of around 10%. Bridgestone (5108.JP), the world’s largest tiremaker, rallied 8.5% in Japan after it said it expected to break even on a net basis this year. European markets are flat to up 0.50% after opening up as much as 1.0% to 1.4%. Technology and consumer stocks are outperforming while healthcare and utilities are underperforming. SNY is down 8% in Paris on concerns that its Lantus diabetes drug has health risks; Lantus is Sanofi’s third biggest-selling drug.
Research Calls/Market Moving News:
POT (93.52): Potash guides Q2 EPS to ~$0.70 vs. prior $1.10-$1.50 and Reuters $0.97: Company says the change reflects substantially lower than forecasted potash sales volumes due to deferral of purchases by customers around the world and lower realized prices for phosphate fertilizers. Adds that any necessary revisions to annual guidance will be addressed in its Q2 release.
Dollar Falls on China Call for World Currency – Bloomberg: “The dollar weakened and stocks pared their advance after China’s central bank reiterated a call for a “super sovereign currency” and said the country’s financial institutions face a tougher environment this year. The Dollar Index that measures the currency’s performance against six trading partners fell as much as 0.7 percent at 11:25 a.m. in London after China’s central bank also said the International Monetary Fund should manage part of members’ foreign reserves. The Dow Jones Stoxx 600 Index of European shares added 0.2 percent, trimming an advance of as much as 1.3 percent. Russia’s Micex Index gained 2 percent. China, the biggest foreign owner of U.S. Treasuries, reduced its holdings of government notes and bonds by $4.4 billion to $763.5 billion in April, according to data released on June 15 in Washington. People’s Bank of China Governor Zhou Xiaochuan in March urged the IMF to expand the functions of its unit of account and move toward a “super- sovereign reserve currency.” “To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers,” the People’s Bank of China said in a review of the economy in 2008 released today.
UBS (12.97): UBS expects to incur net loss in Q2 and confirms Sfr3.8B equity placement: UBS provides the following update on its current trading performance: Based upon preliminary results for April and May and estimated results for June, UBS expects to incur a net loss for Q2. The majority of the expected loss is attributable to own credit and the restructuring charges that have already been announced. The operating result for the quarter is expected to represent an improvement compared with Q1, largely attributable to better market conditions affecting the Investment Bank and a reduction in losses and write downs on legacy risk positions. UBS also confirmed the FT report that it is offering 293,258,050 newly issued shares from authorized capital to a small number of institutional investors at a price of CHF 13.00 per share.
POT (93.52); MOS (43.79); AGU (41.39): Canaccord Adams lowers estimates on fertilizer producers following lowered guidance from Potash (POT): Potash (POT) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $135 from $150. Rating is buy. Mosaic (MOS) estimates FYQ4'09 and FY'10 are lowered. Target is lowered to $62 from $65. Rating is buy. Agrium (AGU) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $50 from $52. Rating is hold.
A.CN (31.64): Accenture (ACN) reports Q3 EPS $0.68 vs Reuters $0.65, guides full year EPS $2.67-$2.70 vs prior $2.60-$2.67 and Reuters $2.65.
FSLR (159.48): Morgan Stanley comments on First Solar, says Phoenix Solar announcement raises near term risk: The firm says yesterday's announcement by FSLR customer Phoenix Solar that it will not meet 2009 EPS guidance along with lack of near term catalysts, raises the risk that FSLR trades off in the coming weeks. Morgan Stanley sees roughly 10% downside from current levels though they remain overweight on the shares.
PALM (14.02): Palm says no details on Pre shipments in May quarter - conf. Call: While noting that the 351K in shipments during the quarter was aided by initial shipments of the Pre, as well as higher than expected Treo Pro sales, management declines to provide any specifics regarding the contribution from Pre. Sticking with new CEO Rubinstein's roots (formerly at Apple), a similar no comment was provided in response to a question on Pre gross margins. However, they did comment that consolidated adjusted gross margins over time are expected to return to levels above 30%. Opex is anticipated to increase from Q4 levels as they more aggressively market Pre going forward. Regarding cash use, management expects cash use to continue through at least the 1H of fiscal 2010 and believe there is potential for cash flow to be positive in the 2H. They do believe that existing cash is sufficient to carry out their launch plans and continue investing in the business. In response to analyst question on exclusivity agreement with Sprint (S), management says they "couldn't be happier" with their launch partner but they are not going to discuss any details on how long the exclusivity lasts. Stock continues to strengthen during the call and was last quoted +13.7% at $15.94 on 7.71M shares.
BHP (55.84): BHP Billiton (BLT.LN) downgraded to equal-weight at Barclays Capital.
JPMorgan upgrades Industrials and Materials sectors to overweight from neutral
MON (75.66): Monsanto maintained buy, target lowered to $95 from $115 at UBS: Firm lowers estimates following the company's lowered long-term gross profit target for Roundup. UBS continues to expect the Seed & Genomics business to grow 22+% per year through 2015.
FFIV (34.15): F5 Networks target raised to $38 from $32 at Oppenheimer: Firm's channel checks suggest the company's Jun-quarter sales are tracking in line with a slight upward bias. Oppenheimer thinks the company could surprise on guidance. FY'10 estimates are increased. Rating is outperform.
Fair Value: SP500 – 916.59; NDX: 1475.37; DOW: 8419.88
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: KBH (-.72/337.6M)
08:30: Personal Income (May): 0.3%; Personal Spending: 0.3%
08:30: PCE Core MoM: 0.1%; PCE Core YoY: 1.8%
10:00: University of Michigan Confidence (June): 69.0
13:00: Fed’s Fisher speaks on the economy
13:00: Baker Hughes US Rig Count
11:30: KBH earnings call
14:00: Fed’s Bernanke gives brief remarks at BLS 125th Anniversary Celebration
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 2 points below fair value while the NASDAQ futures are trading 5 points below fair value at 7:30am ET. Asian markets closed higher following Wall Street’s sharp gains in Thursday’s session (Japan up 0.83%, Hong Kong up 1.78%, Australia up 1.24%, Shanghai up 0.34%, India up 2.92%). Qantas (QAN.AU) cancelled an order for 15 Boeing (BA) B787's and delayed delivery of a further 15 B787's for four years. Suzuki Motor (7269.JP) rose after the Manager Magazin reported yesterday Volkswagen (VOW.GR) was considering taking a stake of around 10%. Bridgestone (5108.JP), the world’s largest tiremaker, rallied 8.5% in Japan after it said it expected to break even on a net basis this year. European markets are flat to up 0.50% after opening up as much as 1.0% to 1.4%. Technology and consumer stocks are outperforming while healthcare and utilities are underperforming. SNY is down 8% in Paris on concerns that its Lantus diabetes drug has health risks; Lantus is Sanofi’s third biggest-selling drug.
Research Calls/Market Moving News:
POT (93.52): Potash guides Q2 EPS to ~$0.70 vs. prior $1.10-$1.50 and Reuters $0.97: Company says the change reflects substantially lower than forecasted potash sales volumes due to deferral of purchases by customers around the world and lower realized prices for phosphate fertilizers. Adds that any necessary revisions to annual guidance will be addressed in its Q2 release.
Dollar Falls on China Call for World Currency – Bloomberg: “The dollar weakened and stocks pared their advance after China’s central bank reiterated a call for a “super sovereign currency” and said the country’s financial institutions face a tougher environment this year. The Dollar Index that measures the currency’s performance against six trading partners fell as much as 0.7 percent at 11:25 a.m. in London after China’s central bank also said the International Monetary Fund should manage part of members’ foreign reserves. The Dow Jones Stoxx 600 Index of European shares added 0.2 percent, trimming an advance of as much as 1.3 percent. Russia’s Micex Index gained 2 percent. China, the biggest foreign owner of U.S. Treasuries, reduced its holdings of government notes and bonds by $4.4 billion to $763.5 billion in April, according to data released on June 15 in Washington. People’s Bank of China Governor Zhou Xiaochuan in March urged the IMF to expand the functions of its unit of account and move toward a “super- sovereign reserve currency.” “To prevent the deficiencies in the main reserve currency, there’s a need to create a new currency that’s delinked from the economies of the issuers,” the People’s Bank of China said in a review of the economy in 2008 released today.
UBS (12.97): UBS expects to incur net loss in Q2 and confirms Sfr3.8B equity placement: UBS provides the following update on its current trading performance: Based upon preliminary results for April and May and estimated results for June, UBS expects to incur a net loss for Q2. The majority of the expected loss is attributable to own credit and the restructuring charges that have already been announced. The operating result for the quarter is expected to represent an improvement compared with Q1, largely attributable to better market conditions affecting the Investment Bank and a reduction in losses and write downs on legacy risk positions. UBS also confirmed the FT report that it is offering 293,258,050 newly issued shares from authorized capital to a small number of institutional investors at a price of CHF 13.00 per share.
POT (93.52); MOS (43.79); AGU (41.39): Canaccord Adams lowers estimates on fertilizer producers following lowered guidance from Potash (POT): Potash (POT) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $135 from $150. Rating is buy. Mosaic (MOS) estimates FYQ4'09 and FY'10 are lowered. Target is lowered to $62 from $65. Rating is buy. Agrium (AGU) estimates for Q2'09, FY'09, and FY'10 are lowered. Target is lowered to $50 from $52. Rating is hold.
A.CN (31.64): Accenture (ACN) reports Q3 EPS $0.68 vs Reuters $0.65, guides full year EPS $2.67-$2.70 vs prior $2.60-$2.67 and Reuters $2.65.
FSLR (159.48): Morgan Stanley comments on First Solar, says Phoenix Solar announcement raises near term risk: The firm says yesterday's announcement by FSLR customer Phoenix Solar that it will not meet 2009 EPS guidance along with lack of near term catalysts, raises the risk that FSLR trades off in the coming weeks. Morgan Stanley sees roughly 10% downside from current levels though they remain overweight on the shares.
PALM (14.02): Palm says no details on Pre shipments in May quarter - conf. Call: While noting that the 351K in shipments during the quarter was aided by initial shipments of the Pre, as well as higher than expected Treo Pro sales, management declines to provide any specifics regarding the contribution from Pre. Sticking with new CEO Rubinstein's roots (formerly at Apple), a similar no comment was provided in response to a question on Pre gross margins. However, they did comment that consolidated adjusted gross margins over time are expected to return to levels above 30%. Opex is anticipated to increase from Q4 levels as they more aggressively market Pre going forward. Regarding cash use, management expects cash use to continue through at least the 1H of fiscal 2010 and believe there is potential for cash flow to be positive in the 2H. They do believe that existing cash is sufficient to carry out their launch plans and continue investing in the business. In response to analyst question on exclusivity agreement with Sprint (S), management says they "couldn't be happier" with their launch partner but they are not going to discuss any details on how long the exclusivity lasts. Stock continues to strengthen during the call and was last quoted +13.7% at $15.94 on 7.71M shares.
BHP (55.84): BHP Billiton (BLT.LN) downgraded to equal-weight at Barclays Capital.
JPMorgan upgrades Industrials and Materials sectors to overweight from neutral
MON (75.66): Monsanto maintained buy, target lowered to $95 from $115 at UBS: Firm lowers estimates following the company's lowered long-term gross profit target for Roundup. UBS continues to expect the Seed & Genomics business to grow 22+% per year through 2015.
FFIV (34.15): F5 Networks target raised to $38 from $32 at Oppenheimer: Firm's channel checks suggest the company's Jun-quarter sales are tracking in line with a slight upward bias. Oppenheimer thinks the company could surprise on guidance. FY'10 estimates are increased. Rating is outperform.
Wednesday, June 24, 2009
June 24, 2009: Morning Call
June 24, 2009: Morning Call
Fair Value: SP500 – 891.24; NDX: 1423.99; DOW: 8268.40
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: MON (1.17/3.46B); PTR (na/45.08B); RAD (-.12/6.53B)
04:00: ECB Euro-zone Current Account (April)
07:00: MBA Mortgage Applications
08:30: Durable Goods Orders (May): -0.8%; Ex-Transportation: -0.5%
09:30: Bank of England’s King, Bean, Fisher, Sentence, Barker testify to Parliaments Treasury Committee
09:30: MON earnings call
10:00: US New Home Sales (May): 360,000; 2.3% MoM
10:15: FDX presents at Wachovia Conference
10:30: DOE Crude Oil and Gasoline Inventories
13:30: FSLR Analyst/Investor meeting
14:15: FOMC Rate Decision: 0.25%
17:00: NKE earnings call
Post-market EPS: BBBY (.24/1.68B); CKR (.25/449.2M); NKE (.94/4.71B); PAYX(.33/507.1M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value at 8am ET. The Federal Reserve will announce their decision on interest rates at 2:15pm. The OECD modestly increased its economic forecast this morning. OECD expects the global economy to contract 4.1% this year and grow 0.7% in 2010. The March forecast estimated a contraction of 4.3% in 2009 and growth of 0.1% in 2010. Asian markets closed higher with energy and basic material sectors snapping back from the recent selling pressure (Japan up 0.43%, Hong Kong up 2.02%, Australia up 0.27%, Shanghai up 1.19%, Taiwan up 2.95%, India up 0.69%). Construction and property shares helped Taiwan rally on a report that various geographies would be upgraded into municipalities, potentially boosting their land values. Steelmakers rose in China and Hong Kong on a report that Asia’s largest iron-ore deposit had been discovered in the country. BHP Billiton (BHP.AU) slipped in Australia on the aforementioned report of a huge iron-ore discovery in China. European markets are up 0.25% to 1% after opening modestly lower. Technology related shares got a lift from Oracles results and mining shares bounced from the recent selling pressure.
Research Calls/Market Moving News:
ORCL (19.87): Oracle reports Q4 EPS $0.46 ex-items vs Reuters $0.44: Company reports revenues of $6.88B vs Reuters $6.48B. Oracle reports Q4 new licenses $2.744B vs. consensus $2.45B. Represents a 13% y/y decline versus guidance for down 17-27%. Non-GAAP operating margin reported 51.1% vs. 49.5%. Oracle guides Q1 (Aug) non-GAAP EPS $0.29-0.31 vs Reuters $0.30 - conf. Call: Currency neutral EPS targeted at $0.31-0.33. Guides non-GAAP revenue to decline 3-5% y/y on a reported basis, implying a range of $5.15-5.26B vs Reuters $5.15B. Oracle says customer "panic" has abated - conf. Call. Management highlights that its pipeline has been growing significantly and indicates that close rates were better than expected during the fourth quarter. They also went on to note that the Q1 outlook assumes "unusually conservative" close rates
FCX (47.18): FBR upgrades FCX to outperform. Target is 58. “The shares of Freeport-McMoRan Copper & Gold, Inc. continue to exhibit strong correlation with the underlying price of copper, which has corrected recently on (1) declining arbitrage between LME and SHME, (2) declining canceled warrants and (3) the speculation that China may have sold some copper recently. While we are cognizant about the near-term weakness, we continue to believe that copper and its largest consumer China do have long-term structural supply issues. In fact, according to the China Non-Ferrous Metal Association, at the current demand level, China might exhaust its copper reserves in 16 years. As such, we believe that China will continue to absorb worldwide supply surplus as strategic reserves. We further maintain our 2010 copper price forecast of $2.40/lb and believe that copper should be priced on cost plus return on a capital basis rather than the simple marginal cash cost. Given the recent pullback in equities, we are upgrading FCX to Outperform from Market Perform. We maintain our price target of $58/share based on 5.5x 2010E EV/EBITDA and we recommend investors take advantage of the market volatility to accumulate FCX shares. Currently, FCX trades at 4.6x our 2010E EV/EBITDA
GOOG (405.68): Piper Jaffray is positive on GOOG following their quarterly eCommerce survey. “We conducted our quarterly eCommerce survey of 315 online shoppers and the results suggest search is well positioned for a consumer increase in eCommerce activity. Since Google is the leader in search, and we do not believe this is likely to change long term, we believe Google is best positioned to benefit from these improving consumer trends. Our survey results suggest that 17% of consumers prefer search as their primary online shopping method, up from 8% in September 2008 and 14% in March 2009. Search is now the most preferred method to shop online for more consumers than online auction (eBay) or comparison shopping. We believe this is a result of search engines, and specifically Google, improving their shopping engines and offering better experiences than many other online offerings.
Iron ore deposit discovery reported in China - China News Agency:
The China News Agency said that a 3B MT iron ore deposit was discovered in the Chinese province of Liaoning, and could start production as early as next year. The report comes as Chinese steel makers are in iron ore price negotiations with producers, and shipping rates recently have been highly leveraged to such shipments, with elevated demand from China cited as a primary driver.
AXP (23.39): American Express looks overpriced – WSJ: A "Heard on the Street" column says AmEx's P-E ratio of 16.9 far exceeds JPMorgan Chase (JPM)'s 11.9. It's close to Visa (V)'s 18.6, but Visa does not have credit risk, and AmEx is dealing with new bank regulations. At 12.9 times earnings, MasterCard (MA) represents much cheaper exposure to payments than AmEx does.
AMT (29.83): American Tower upgraded to overweight from neutral at JPMorgan:
Target is $36
FSYS (20.82): Fuel Systems Solutions upgraded to buy from neutral at Janney Montgomery Scott: Target is $31
Oppenheimer downgrades refiners: Frontier Oil (FTO) downgraded to perform from outperform .Sunoco (SUN) downgraded to perform from outperform. Tesoro (TSO) downgraded to perform from outperform. Valero Energy (VLO) downgraded to perform from outperform. Firm cites a deteriorating industry outlook of low margins caused by high oil prices and weak demand. Oppenheimer believe sUS gasoline consumption may have peaked, while diesel demand will continue to reflect economic activity.
RIMM (69.60): China Telecom (CHA) is in talks with Research In Motion to offer BlackBerry in China -- Dow Jones, citing Caijing Magazine: The report, citing an unnamed China Telecom executive says the two companies are currently testing the devices and a launch schedule has not yet been determined. RIMM says it doesn't comment on market rumors, while a CHA spokesman couldn't be reached for comment. RIMM currently offers the BlackBerry in China through China Mobile (CHL).
AAPL (134.01): Tennessee hospital confirms reports that Apple's Steve Jobs underwent liver transplant: The Methodist University Hospital Transplant Institute confirmed, with the patient's permission, that Steve Jobs received a liver transplant. The hospital said that Jobs "received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis.
Fair Value: SP500 – 891.24; NDX: 1423.99; DOW: 8268.40
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: MON (1.17/3.46B); PTR (na/45.08B); RAD (-.12/6.53B)
04:00: ECB Euro-zone Current Account (April)
07:00: MBA Mortgage Applications
08:30: Durable Goods Orders (May): -0.8%; Ex-Transportation: -0.5%
09:30: Bank of England’s King, Bean, Fisher, Sentence, Barker testify to Parliaments Treasury Committee
09:30: MON earnings call
10:00: US New Home Sales (May): 360,000; 2.3% MoM
10:15: FDX presents at Wachovia Conference
10:30: DOE Crude Oil and Gasoline Inventories
13:30: FSLR Analyst/Investor meeting
14:15: FOMC Rate Decision: 0.25%
17:00: NKE earnings call
Post-market EPS: BBBY (.24/1.68B); CKR (.25/449.2M); NKE (.94/4.71B); PAYX(.33/507.1M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value at 8am ET. The Federal Reserve will announce their decision on interest rates at 2:15pm. The OECD modestly increased its economic forecast this morning. OECD expects the global economy to contract 4.1% this year and grow 0.7% in 2010. The March forecast estimated a contraction of 4.3% in 2009 and growth of 0.1% in 2010. Asian markets closed higher with energy and basic material sectors snapping back from the recent selling pressure (Japan up 0.43%, Hong Kong up 2.02%, Australia up 0.27%, Shanghai up 1.19%, Taiwan up 2.95%, India up 0.69%). Construction and property shares helped Taiwan rally on a report that various geographies would be upgraded into municipalities, potentially boosting their land values. Steelmakers rose in China and Hong Kong on a report that Asia’s largest iron-ore deposit had been discovered in the country. BHP Billiton (BHP.AU) slipped in Australia on the aforementioned report of a huge iron-ore discovery in China. European markets are up 0.25% to 1% after opening modestly lower. Technology related shares got a lift from Oracles results and mining shares bounced from the recent selling pressure.
Research Calls/Market Moving News:
ORCL (19.87): Oracle reports Q4 EPS $0.46 ex-items vs Reuters $0.44: Company reports revenues of $6.88B vs Reuters $6.48B. Oracle reports Q4 new licenses $2.744B vs. consensus $2.45B. Represents a 13% y/y decline versus guidance for down 17-27%. Non-GAAP operating margin reported 51.1% vs. 49.5%. Oracle guides Q1 (Aug) non-GAAP EPS $0.29-0.31 vs Reuters $0.30 - conf. Call: Currency neutral EPS targeted at $0.31-0.33. Guides non-GAAP revenue to decline 3-5% y/y on a reported basis, implying a range of $5.15-5.26B vs Reuters $5.15B. Oracle says customer "panic" has abated - conf. Call. Management highlights that its pipeline has been growing significantly and indicates that close rates were better than expected during the fourth quarter. They also went on to note that the Q1 outlook assumes "unusually conservative" close rates
FCX (47.18): FBR upgrades FCX to outperform. Target is 58. “The shares of Freeport-McMoRan Copper & Gold, Inc. continue to exhibit strong correlation with the underlying price of copper, which has corrected recently on (1) declining arbitrage between LME and SHME, (2) declining canceled warrants and (3) the speculation that China may have sold some copper recently. While we are cognizant about the near-term weakness, we continue to believe that copper and its largest consumer China do have long-term structural supply issues. In fact, according to the China Non-Ferrous Metal Association, at the current demand level, China might exhaust its copper reserves in 16 years. As such, we believe that China will continue to absorb worldwide supply surplus as strategic reserves. We further maintain our 2010 copper price forecast of $2.40/lb and believe that copper should be priced on cost plus return on a capital basis rather than the simple marginal cash cost. Given the recent pullback in equities, we are upgrading FCX to Outperform from Market Perform. We maintain our price target of $58/share based on 5.5x 2010E EV/EBITDA and we recommend investors take advantage of the market volatility to accumulate FCX shares. Currently, FCX trades at 4.6x our 2010E EV/EBITDA
GOOG (405.68): Piper Jaffray is positive on GOOG following their quarterly eCommerce survey. “We conducted our quarterly eCommerce survey of 315 online shoppers and the results suggest search is well positioned for a consumer increase in eCommerce activity. Since Google is the leader in search, and we do not believe this is likely to change long term, we believe Google is best positioned to benefit from these improving consumer trends. Our survey results suggest that 17% of consumers prefer search as their primary online shopping method, up from 8% in September 2008 and 14% in March 2009. Search is now the most preferred method to shop online for more consumers than online auction (eBay) or comparison shopping. We believe this is a result of search engines, and specifically Google, improving their shopping engines and offering better experiences than many other online offerings.
Iron ore deposit discovery reported in China - China News Agency:
The China News Agency said that a 3B MT iron ore deposit was discovered in the Chinese province of Liaoning, and could start production as early as next year. The report comes as Chinese steel makers are in iron ore price negotiations with producers, and shipping rates recently have been highly leveraged to such shipments, with elevated demand from China cited as a primary driver.
AXP (23.39): American Express looks overpriced – WSJ: A "Heard on the Street" column says AmEx's P-E ratio of 16.9 far exceeds JPMorgan Chase (JPM)'s 11.9. It's close to Visa (V)'s 18.6, but Visa does not have credit risk, and AmEx is dealing with new bank regulations. At 12.9 times earnings, MasterCard (MA) represents much cheaper exposure to payments than AmEx does.
AMT (29.83): American Tower upgraded to overweight from neutral at JPMorgan:
Target is $36
FSYS (20.82): Fuel Systems Solutions upgraded to buy from neutral at Janney Montgomery Scott: Target is $31
Oppenheimer downgrades refiners: Frontier Oil (FTO) downgraded to perform from outperform .Sunoco (SUN) downgraded to perform from outperform. Tesoro (TSO) downgraded to perform from outperform. Valero Energy (VLO) downgraded to perform from outperform. Firm cites a deteriorating industry outlook of low margins caused by high oil prices and weak demand. Oppenheimer believe sUS gasoline consumption may have peaked, while diesel demand will continue to reflect economic activity.
RIMM (69.60): China Telecom (CHA) is in talks with Research In Motion to offer BlackBerry in China -- Dow Jones, citing Caijing Magazine: The report, citing an unnamed China Telecom executive says the two companies are currently testing the devices and a launch schedule has not yet been determined. RIMM says it doesn't comment on market rumors, while a CHA spokesman couldn't be reached for comment. RIMM currently offers the BlackBerry in China through China Mobile (CHL).
AAPL (134.01): Tennessee hospital confirms reports that Apple's Steve Jobs underwent liver transplant: The Methodist University Hospital Transplant Institute confirmed, with the patient's permission, that Steve Jobs received a liver transplant. The hospital said that Jobs "received a liver transplant because he was the patient with the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available. Mr. Jobs is now recovering well and has an excellent prognosis.
Tuesday, June 23, 2009
June 23, 2009: Morning Call
June 23, 2009: Morning Call
Fair Value: SP500 – 889.20; NDX: 1426.18; DOW: 8285.01
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: KR (.60/23.35B)
04:00: Euro-zone PMI Manufacturing (June): 42.1 (actual: 42.4)
04:00: Euro-zone PMI Services (June): 45.6 (actual: 44.5)
05:00: OECD May Economic Outlook
08:00: PHM presents at Wachovia Conference
09:15: GOOG presents at Euromoney Renewable Energy Finance Forum
10:00: Richmond Fed Manufacturing Index
10:00: Existing Home Sales (May): 4.82 million; Home Price Index: -0.4% MoM
10:00: Existing Home Sales (May): 3.0% MoM
10:45: DHI presents at Wachovia Conference
11:00: BAC, MS, UBS present at Euromoney Renewable Energy Finance Forum
11:45: MET presents at Wachovia Conference
13:00: TOL presents at Wachovia Conference
13:00: Treasury auctions 40 billion of 2 year notes.
15:10: Treasury officials discuss TARP at NYSSA Conference
15:15: GS and JPM present at Euromoney Renewable Energy Finance Forum
17:00: ORCL earnings call
Post-market EPS: DRI (.86/1.98B); ORCL (.44/6.48B); SONC (.20/179.4M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 6 points above fair value at 7:45 am ET. Asian markets closed sharply lower led by energy and commodity sectors. Emerging markets (EEM) have lost 10% from the recent peak. Shippers lost ground on a dip in the Baltic Dry Index. China pared declines on speculation the central bank will reduce the amount lenders have to hold in reserve. China Minsheng Banking Corp (600016.CH) rose on reports it will raise CNY20B through an IPO in Hong Kong. South Korea fell as decliners outnumbered advancers almost 7-to-1 though some LCD issues managed to buck the trend and eke out gains. European markets are flat to modestly higher (up 0.30%); markets in Russia are down 1.0% after dropping almost 8% in Monday’s session. Advancers on the FTSE 100 lead declines 13-7. Anglo American (AAL.LN) trades lower after rejects combination with Xstrata (XTA.LN). The shares pared declines on rumors that Chinalco (ACH) may step in with a bid. Anglo American upgraded to buy at BoA Merrill. BHP Billiton (BLT.LN) upgraded to buy at Citi. Credit Suisse downgrades Gazprom (GAZP.RU). Swiss Life (SLHN.VX) downgraded to sell at UBS.
In my May 20 morning call, I noted that the “S&P would likely settle into a trading range between 875-950 for the next few months or until incoming information alters the consensus view of a modest recovery in the 2H09 and 2010.” I continue to believe that the range will hold and opportunistic traders should buy the bottom of the range near the 875-880-area and short the top end of the end range near 940-950. Downside risks have increased, though, because the focus has shifted from modest second half growth toward the outlook for sustainable global growth in 2010. The incessant (and ridiculous) talk of “green shoots” appears to have justifiably subsided because the economy should recover given the massive fiscal and monetary intervention by the US Government and Federal Reserve. The key question is sustainability? What will happen in 2010 when the US government and the Federal Reserve will need to begin scaling back the massive monetary and fiscal stimulus? What will happen if there is no political will to withdraw the fiscal and monetary stimulus?
Research Calls/Market Moving News:
GS (137.01): FBR raises their price target on GS and reiterates their outperform rating: “We are raising our EPS estimates and price target (to $160 from $140) while reiterating Outperform on Goldman Sachs (GS) shares, given what has been a better-than-expected market share pickup from disruptions at competitors. With the better-than-expected share gains, we believe Goldman Sachs is likely to return toward a more normalized +15% ROE sooner than we had originally anticipated, resulting in our improved 2010 outlook. We note that our 2010 estimate still implies a sub-15% ROE, and we believe the potential remains for upside surprises to our numbers should the overall economy show some signs of growth. Our revised price target implies a 12.2x EPS multiple on our new 2010 EPS estimate, which increased from $11.30 to $13.10. On top of our longer-term expectations, we expect the second-quarter's results to benefit from a favorable trading and capital market environment in the second quarter, although perhaps not to the degree implied by consensus estimates, given the expenses associated with TARP repayment, further commercial real estate write-downs, and credit valuation adjustments.”
US airline passenger revenue fell 26% y/y in May – WSJ: The paper cites data from the ATA. The May figure marked the seventh consecutive monthly decline. The number of passengers fell 9.5%, while the average price fell 17.6%. Cargo traffic fell for a ninth straight month, down 22% y/y. The ATA noted that the H1N1 influenza outbreak exacerbated an already weak demand environment (I would note that the rail, air, and freight data has not been good of late. Certainly, not supportive of the green shoot con job).
AAPL (137.37): WSJ notes COO Tim Cook's value to Apple has never been higher: People familiar with the situation say Motorola (MOT) and Dell (DELL) have both tried to hire Cook within the past two years. To build a bigger moat around him, a person familiar with Apple's thinking says the company's board may invite Cook to join.
AAPL (137.37): Apple employees confirm to CNBC that Monday was Steve Jobs's first day back at work: There were rumors around earlier that Jobs had been back at work today, following the reports over the weekend that he had received a liver transplant a couple of months ago.
FDX (50.05): FedEx upgraded to overweight from neutral at JPMorgan: Target increased to $66 from $60. The firm believes the bad news is priced into the valuation and also notes the company's operating leverage
COP (40.43): ConocoPhillips upgraded to outperform from market perform at Bernstein: Target is $54.
UBS reduces estimates for the US Airline group: The firm has reduced estimates for the group given continued weakness in demand and higher fuel prices. UBS believes comps will remain tough into Q4 and says revenue in June, July, and August remained about as weak as May.
Fair Value: SP500 – 889.20; NDX: 1426.18; DOW: 8285.01
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: KR (.60/23.35B)
04:00: Euro-zone PMI Manufacturing (June): 42.1 (actual: 42.4)
04:00: Euro-zone PMI Services (June): 45.6 (actual: 44.5)
05:00: OECD May Economic Outlook
08:00: PHM presents at Wachovia Conference
09:15: GOOG presents at Euromoney Renewable Energy Finance Forum
10:00: Richmond Fed Manufacturing Index
10:00: Existing Home Sales (May): 4.82 million; Home Price Index: -0.4% MoM
10:00: Existing Home Sales (May): 3.0% MoM
10:45: DHI presents at Wachovia Conference
11:00: BAC, MS, UBS present at Euromoney Renewable Energy Finance Forum
11:45: MET presents at Wachovia Conference
13:00: TOL presents at Wachovia Conference
13:00: Treasury auctions 40 billion of 2 year notes.
15:10: Treasury officials discuss TARP at NYSSA Conference
15:15: GS and JPM present at Euromoney Renewable Energy Finance Forum
17:00: ORCL earnings call
Post-market EPS: DRI (.86/1.98B); ORCL (.44/6.48B); SONC (.20/179.4M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 6 points above fair value at 7:45 am ET. Asian markets closed sharply lower led by energy and commodity sectors. Emerging markets (EEM) have lost 10% from the recent peak. Shippers lost ground on a dip in the Baltic Dry Index. China pared declines on speculation the central bank will reduce the amount lenders have to hold in reserve. China Minsheng Banking Corp (600016.CH) rose on reports it will raise CNY20B through an IPO in Hong Kong. South Korea fell as decliners outnumbered advancers almost 7-to-1 though some LCD issues managed to buck the trend and eke out gains. European markets are flat to modestly higher (up 0.30%); markets in Russia are down 1.0% after dropping almost 8% in Monday’s session. Advancers on the FTSE 100 lead declines 13-7. Anglo American (AAL.LN) trades lower after rejects combination with Xstrata (XTA.LN). The shares pared declines on rumors that Chinalco (ACH) may step in with a bid. Anglo American upgraded to buy at BoA Merrill. BHP Billiton (BLT.LN) upgraded to buy at Citi. Credit Suisse downgrades Gazprom (GAZP.RU). Swiss Life (SLHN.VX) downgraded to sell at UBS.
In my May 20 morning call, I noted that the “S&P would likely settle into a trading range between 875-950 for the next few months or until incoming information alters the consensus view of a modest recovery in the 2H09 and 2010.” I continue to believe that the range will hold and opportunistic traders should buy the bottom of the range near the 875-880-area and short the top end of the end range near 940-950. Downside risks have increased, though, because the focus has shifted from modest second half growth toward the outlook for sustainable global growth in 2010. The incessant (and ridiculous) talk of “green shoots” appears to have justifiably subsided because the economy should recover given the massive fiscal and monetary intervention by the US Government and Federal Reserve. The key question is sustainability? What will happen in 2010 when the US government and the Federal Reserve will need to begin scaling back the massive monetary and fiscal stimulus? What will happen if there is no political will to withdraw the fiscal and monetary stimulus?
Research Calls/Market Moving News:
GS (137.01): FBR raises their price target on GS and reiterates their outperform rating: “We are raising our EPS estimates and price target (to $160 from $140) while reiterating Outperform on Goldman Sachs (GS) shares, given what has been a better-than-expected market share pickup from disruptions at competitors. With the better-than-expected share gains, we believe Goldman Sachs is likely to return toward a more normalized +15% ROE sooner than we had originally anticipated, resulting in our improved 2010 outlook. We note that our 2010 estimate still implies a sub-15% ROE, and we believe the potential remains for upside surprises to our numbers should the overall economy show some signs of growth. Our revised price target implies a 12.2x EPS multiple on our new 2010 EPS estimate, which increased from $11.30 to $13.10. On top of our longer-term expectations, we expect the second-quarter's results to benefit from a favorable trading and capital market environment in the second quarter, although perhaps not to the degree implied by consensus estimates, given the expenses associated with TARP repayment, further commercial real estate write-downs, and credit valuation adjustments.”
US airline passenger revenue fell 26% y/y in May – WSJ: The paper cites data from the ATA. The May figure marked the seventh consecutive monthly decline. The number of passengers fell 9.5%, while the average price fell 17.6%. Cargo traffic fell for a ninth straight month, down 22% y/y. The ATA noted that the H1N1 influenza outbreak exacerbated an already weak demand environment (I would note that the rail, air, and freight data has not been good of late. Certainly, not supportive of the green shoot con job).
AAPL (137.37): WSJ notes COO Tim Cook's value to Apple has never been higher: People familiar with the situation say Motorola (MOT) and Dell (DELL) have both tried to hire Cook within the past two years. To build a bigger moat around him, a person familiar with Apple's thinking says the company's board may invite Cook to join.
AAPL (137.37): Apple employees confirm to CNBC that Monday was Steve Jobs's first day back at work: There were rumors around earlier that Jobs had been back at work today, following the reports over the weekend that he had received a liver transplant a couple of months ago.
FDX (50.05): FedEx upgraded to overweight from neutral at JPMorgan: Target increased to $66 from $60. The firm believes the bad news is priced into the valuation and also notes the company's operating leverage
COP (40.43): ConocoPhillips upgraded to outperform from market perform at Bernstein: Target is $54.
UBS reduces estimates for the US Airline group: The firm has reduced estimates for the group given continued weakness in demand and higher fuel prices. UBS believes comps will remain tough into Q4 and says revenue in June, July, and August remained about as weak as May.
Thursday, June 18, 2009
June 18, 2009: Morning Call
June 18, 2009: Morning Call
Fair Value: SP500 – 906.79; NDX: 1455.58; DOW: 8444.01
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: CCL (.30/3.00B); SJM (.63/991.5M)
08:00: GENZ presents at Jefferies Healthcare Conference
08:30: JCP Business Update Call
08:30: Initial Jobless Claims: 604,000 ; Continuing Claims: 6.8 million
09:30: Treasury Secretary Geithner testifies to senate on financial regulation
10:00: Philly Fed (June): -18
10:30: EIA Natural Gas Storage Chance
12:30: CELG presents at Jefferies Healthcare Conference
17:00: RIMM earnings call
Post-market EPS: RIMM (.92/3.4B); SWHC (.09/90.8M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points below fair value while the NASDAQ futures are trading 8 points below fair value at 8:00am ET. The S&P futures are 6 points off the overnight high (912) because European markets reversed initial opening gains. European markets are down 0.25% to 0.70% after opening 0.25% to 0.50% higher. Weaker than expected UK retail sales is pressuring consumer, industrial, basic material, and financial sectors. Asian markets declined in quiet trading with the MSCI Asia Pacific index moving to a three-week low (Japan down 1.4%, Hong Kong down 1.7%, Australia down 0.31%, Shanghai up 1.56%, India down 1.7%, South Korea down 1.2%). The World Bank boosted their growth forecast for China to 7.2%. Although the news has not garnered much attention in the financial press, SocGen analyst Albert Edwards issued a strategy report yesterday afternoon predicting a significant drop in Chinese equities before the end of the year. This could have played a role in the weakness overnight as Edwards is known for calling for a major reversal in Asian markets in 1997.
Research Calls/Market Moving News:
IBM (107.00): IBM initiated outperform at Cowen & Co.
AAPL (135.58): Apple mentioned positively at RBC Capital: The firm sees healthy iPhone uptake and estimates AAPL ships 500K-700K iPhone 3GS units in the 1st week and 1.5M in Q1. RBC continues to see pent up demand for iPhone with AAPL handset share reaching 2.4% in C10. Shares are reiterated outperform. Target is $165.
SocGen analyst Albert Edwards comments on China: “Most areas in the markets have now discounted a V-shaped recovery. Any doubt will trigger a rapid reversal in prices. I continue to be extremely skeptical and see recent events as part of a 1930s-like, long march to revulsion. Talking about long marches, nowhere in the world fills me with more skepticism than the Chinese economic recovery. The continued enthusiasm for all things China reminds me so much of the way investors were almost totally blind to the fact the US growth miracle was built on sand. China could be the biggest disappointment yet. Whether you look at surging commodity prices or the near 60% ytd run-up in the Metals & Mining sector, one thing is clear; the markets believe wholeheartedly in the Chinese economic recovery. We have a long history of sticking our necks way out against the consensus. In 2001 we repeatedly wrote that the US growth miracle would be seen in retrospect as a sick joke, as it was based on Kilimanjaro-like mountains of debt. It has taken a while, but now most concur with that ‘extreme’ view. In a few years time, I believe we will look back on the Chinese economic miracle as the sickest joke yet played on investors.”
RTP (170.45); BHP (55.26): Chinese official talks up possibility of using country's anti-monopoly laws to thwart iron ore jv between Rio Tinto (RTP) and BHP Billiton (BHP) – FT: Chinese opposition to the recently announced iron ore joint venture between Rio and BHP has been widely reported but RTP and BHP shares continue to get pounded. The FT now cites comments from Chen Yanhai, head of the raw material department of China’s ministry of industry and information technology, who told state media that the proposed joint venture “has an obvious color of monopoly” and should be subject to the country’s antitrust laws.
UBS comments on global fertilizer pricing: Firm notes that timing of yesterday's announcement by K+S AG (SDF.GR) to cut its current spot potash price is surprising give the is so close to Indian/Chinese potash negotiations. UBS comments that the risk posed by the cut is that it prompts others to undercut. Firm believes however that the markets can stabilize near current levels and continues to expect China and India to sign '09 contracts in the range of $500-525 FOB Vancouver. UBS lowers its medium term potash price to $600/t from $700/t FOB Vancouver, but leaves long term forecast of $700/t unchanged.
NYT looks at proposed Consumer Financial Protection Agency: A banking industry figure says current regulators have all the authority they need; the industry claims it will lose billions of dollars if the agency comes into existence. The article describes the CFPA as a sort of FDA for financial products, having the right to set out standards before banks could offer some options, and requiring warnings on others. Visible problems include exactly how the agency will be financed, since a conflict of interest would result from bank fees' being used, and the division between state and federal powers.
GE (12.25): Regulatory overhaul likely to present problems for GE Capital – WSJ: In a "Heard on the Street" column, the Journal reports that the Obama administration's proposed regulatory overhaul of the financial industry may be particularly painful for GE Capital. The article notes that while GE Capital has $613B in assets and provides significant amounts of credit to consumers and corporations, the bulk of its operations are not subject to the oversight of a banking regulator. However, if Congress passes the administration's proposals, GE Capital would likely be deemed a systemically important firm, meaning that it would face much more stringent regulation. According to the paper, the bigger problem is that such supervision would also extend to the firm's parent company and other subsidiaries, a dynamic that could make it necessary for GE Capital to be spun off. The article goes on to note that such a move could be problematic for parent GE, given that it would have to ensure that GE Capital had sufficient capital and stable funding.
Fair Value: SP500 – 906.79; NDX: 1455.58; DOW: 8444.01
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: CCL (.30/3.00B); SJM (.63/991.5M)
08:00: GENZ presents at Jefferies Healthcare Conference
08:30: JCP Business Update Call
08:30: Initial Jobless Claims: 604,000 ; Continuing Claims: 6.8 million
09:30: Treasury Secretary Geithner testifies to senate on financial regulation
10:00: Philly Fed (June): -18
10:30: EIA Natural Gas Storage Chance
12:30: CELG presents at Jefferies Healthcare Conference
17:00: RIMM earnings call
Post-market EPS: RIMM (.92/3.4B); SWHC (.09/90.8M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points below fair value while the NASDAQ futures are trading 8 points below fair value at 8:00am ET. The S&P futures are 6 points off the overnight high (912) because European markets reversed initial opening gains. European markets are down 0.25% to 0.70% after opening 0.25% to 0.50% higher. Weaker than expected UK retail sales is pressuring consumer, industrial, basic material, and financial sectors. Asian markets declined in quiet trading with the MSCI Asia Pacific index moving to a three-week low (Japan down 1.4%, Hong Kong down 1.7%, Australia down 0.31%, Shanghai up 1.56%, India down 1.7%, South Korea down 1.2%). The World Bank boosted their growth forecast for China to 7.2%. Although the news has not garnered much attention in the financial press, SocGen analyst Albert Edwards issued a strategy report yesterday afternoon predicting a significant drop in Chinese equities before the end of the year. This could have played a role in the weakness overnight as Edwards is known for calling for a major reversal in Asian markets in 1997.
Research Calls/Market Moving News:
IBM (107.00): IBM initiated outperform at Cowen & Co.
AAPL (135.58): Apple mentioned positively at RBC Capital: The firm sees healthy iPhone uptake and estimates AAPL ships 500K-700K iPhone 3GS units in the 1st week and 1.5M in Q1. RBC continues to see pent up demand for iPhone with AAPL handset share reaching 2.4% in C10. Shares are reiterated outperform. Target is $165.
SocGen analyst Albert Edwards comments on China: “Most areas in the markets have now discounted a V-shaped recovery. Any doubt will trigger a rapid reversal in prices. I continue to be extremely skeptical and see recent events as part of a 1930s-like, long march to revulsion. Talking about long marches, nowhere in the world fills me with more skepticism than the Chinese economic recovery. The continued enthusiasm for all things China reminds me so much of the way investors were almost totally blind to the fact the US growth miracle was built on sand. China could be the biggest disappointment yet. Whether you look at surging commodity prices or the near 60% ytd run-up in the Metals & Mining sector, one thing is clear; the markets believe wholeheartedly in the Chinese economic recovery. We have a long history of sticking our necks way out against the consensus. In 2001 we repeatedly wrote that the US growth miracle would be seen in retrospect as a sick joke, as it was based on Kilimanjaro-like mountains of debt. It has taken a while, but now most concur with that ‘extreme’ view. In a few years time, I believe we will look back on the Chinese economic miracle as the sickest joke yet played on investors.”
RTP (170.45); BHP (55.26): Chinese official talks up possibility of using country's anti-monopoly laws to thwart iron ore jv between Rio Tinto (RTP) and BHP Billiton (BHP) – FT: Chinese opposition to the recently announced iron ore joint venture between Rio and BHP has been widely reported but RTP and BHP shares continue to get pounded. The FT now cites comments from Chen Yanhai, head of the raw material department of China’s ministry of industry and information technology, who told state media that the proposed joint venture “has an obvious color of monopoly” and should be subject to the country’s antitrust laws.
UBS comments on global fertilizer pricing: Firm notes that timing of yesterday's announcement by K+S AG (SDF.GR) to cut its current spot potash price is surprising give the is so close to Indian/Chinese potash negotiations. UBS comments that the risk posed by the cut is that it prompts others to undercut. Firm believes however that the markets can stabilize near current levels and continues to expect China and India to sign '09 contracts in the range of $500-525 FOB Vancouver. UBS lowers its medium term potash price to $600/t from $700/t FOB Vancouver, but leaves long term forecast of $700/t unchanged.
NYT looks at proposed Consumer Financial Protection Agency: A banking industry figure says current regulators have all the authority they need; the industry claims it will lose billions of dollars if the agency comes into existence. The article describes the CFPA as a sort of FDA for financial products, having the right to set out standards before banks could offer some options, and requiring warnings on others. Visible problems include exactly how the agency will be financed, since a conflict of interest would result from bank fees' being used, and the division between state and federal powers.
GE (12.25): Regulatory overhaul likely to present problems for GE Capital – WSJ: In a "Heard on the Street" column, the Journal reports that the Obama administration's proposed regulatory overhaul of the financial industry may be particularly painful for GE Capital. The article notes that while GE Capital has $613B in assets and provides significant amounts of credit to consumers and corporations, the bulk of its operations are not subject to the oversight of a banking regulator. However, if Congress passes the administration's proposals, GE Capital would likely be deemed a systemically important firm, meaning that it would face much more stringent regulation. According to the paper, the bigger problem is that such supervision would also extend to the firm's parent company and other subsidiaries, a dynamic that could make it necessary for GE Capital to be spun off. The article goes on to note that such a move could be problematic for parent GE, given that it would have to ensure that GE Capital had sufficient capital and stable funding.
Tuesday, June 16, 2009
June 16, 2009: Morning Call
June 16, 2009: Morning Call
Fair Value: SP500 – 919.80; NDX: 1456.86; DOW: 8559.64
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: BBY (.33/10.16B); FDS (.72/155.4M); SFD (-.56/3.07B)
05:00: Euro-zone CPI (May): 0.0% MoM; 0.0% YoY; Core CPI (May): 1.6% YoY
05:00: Euro-zone ZEW Economic Sentiment Survey (June): 34.0 (actual: better at 42.7)
08:30: US Producer Price Index (May): 0.6% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (May): -4.4% YoY; Ex-Food/Energy: 3.2% YoY
08:30: US Housing Starts (May): 480,000; Building Permits: 500,000
09:15: Industrial Production (May): -0.8%; Capacity Utilization: 68.5%
10:00: BBY earnings call
13:00: NVDA Analyst Day
14:15: ORCL presents at Knight Capital Investor Conference
14:15: IBM presents at Knight Capital Investor Conference
15:15: GS presents at Knight Capital Investor Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ADBE earnings call
Post-market EPS: ADBE (.34/695.8M)
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 US dollar snapped a two-day rally (Euro is up 0.75% to 1.3903; British Pound is up 0.87% to 1.6461) due to stronger German and Euro-zone confidence, higher UK CPI, and chatter that BRIC countries may diversify their reserves among themselves in order to reduce dollar dependence. Commodities have reversed some of Monday’s decline on the weaker dollar (Crude is up 1.8% to 71.94). Treasury bonds are little changed. Asian markets closed lower except for India, which reversed opening losses (Japan down 2.8%, Hong Kong down 1.8%, Australia down 1.7%, South Korea down 0.95%, India up 0.55%). Financial, commodity, and energy shares led the decline in Asia following the sell-off on Wall Street on Monday. European markets are up 0.50% near the highs of the session. Mining shares (down 0.25%) continue to lag while banks (up 1.0%) and defensive sectors (food retail and pharmaceuticals) outperform. (UBSN.VX) traded lower after being placed on review for possible downgrade by Moody's. Natl Bank of Greece (ETE.GA) proposes a rights issue to raise approx €1.25B. The shares fell and pressured other Greek bank shares. Rio Tinto (RIO.LN) said trading outlook for rest of 2009 remains uncertain.
Research Calls/Market Moving News:
BAC (13.33): Sandler O’Neill analyst Jeff Harte comments on BAC’s May Master Trust data: “BAC: Net charge-offs were 12.50%, compared with 10.47% in April and the current three month average of 10.76%. This 203 basis point sequential monthly increase was more than we anticipated and suggests that our 10.75% domestic credit card net charge-off rate for 2Q09 may be low. It is noteworthy that BAC's 1Q09 reported domestic NCO ratio of 9.81% was 91 basis points below the trust's same period average. Delinquencies (30+ days) reported were 7.95%, versus 8.01% in April and the current three-month average of 7.94%. The portfolio yield increased to 19.40%, compared with 18.41% in April and a current three-month average of 18.73%. The excess spread decreased to 3.77%, from 4.72% last month and the three-month average of 4.76%.
RIMM (80.38): Research In Motion target increased to $92 from $85 at Thomas Weisel Partners: Firm sees a solid May quarter and an in line Aug outlook, with continued market share gains as RIMM rolls out several upgrades and "new" platforms. Target increased due to recent increases in the market multiple. Rating is overweight.
RIMM (80.38): Research In Motion to sell BlackBerry Tour later this summer: The smartphone will be available at Sprint (S) for $199.99 with a new line of service or eligible upgrade, two-year service agreement, and $50 instant rebate and $100 mail-in rebate. The phone will operate globally. Bloomberg reports that co-CEO Jim Balsillie says the Tour will be sold in Canada through BCE (BCE.CN) and Telus (T.CN). Balsillie declines to comment on when RIMM might introduce a touchscreen Storm with a pullout keyboard.
IBM (107.62): IBM target raised to $140 from $120 at Thomas Weisel Partners: Firm notes the company's recurring revenue base makes IBM less cyclical, and believes low single digit revenue growth, modest margin expansion, acquisitions, and share repurchases support high single digit EPS growth. Estimates are unchanged. Rating is overweight.
Canaccord Adams initiates FFIV, BRCD, CSCO, EMC, NTAP with buy ratings: F5 Networks (FFIV) initiated speculative buy with $41.50 target. Brocade (BRCD) initiated buy with $10 target. Cisco Systems (CSCO) initiated buy with $23 target. EMC (EMC) initiated buy with $15 target. NetApp (NTAP) initiated buy with $22.50 target.
MSFT (23.42): Microsoft target increased to $26 from $22 at Jefferies: Firm notes that Windows 7 is due out on 22-Oct and expects a large, rapid PC upgrade cycle starting in late in 2010. Buy rating is reiterated
CMI (34.02): Cummins initiated buy at Goldman Sachs: Target is $42.
LZB (3.64): La-Z-Boy reports Q4 EPS $0.07 ex-items vs Reuters ($0.11): Company reports revenues of $284.5M vs Reuters $296.5M. Shares are trading up 25%.
Secondary Issuance: HAR (9M share secondary); MMR (11M share secondary); BRKR (35M share secondary), GWR (4M share secondary).
Fair Value: SP500 – 919.80; NDX: 1456.86; DOW: 8559.64
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: BBY (.33/10.16B); FDS (.72/155.4M); SFD (-.56/3.07B)
05:00: Euro-zone CPI (May): 0.0% MoM; 0.0% YoY; Core CPI (May): 1.6% YoY
05:00: Euro-zone ZEW Economic Sentiment Survey (June): 34.0 (actual: better at 42.7)
08:30: US Producer Price Index (May): 0.6% MoM; Ex-Food/Energy: 0.1% MoM
08:30: US Producer Price Index (May): -4.4% YoY; Ex-Food/Energy: 3.2% YoY
08:30: US Housing Starts (May): 480,000; Building Permits: 500,000
09:15: Industrial Production (May): -0.8%; Capacity Utilization: 68.5%
10:00: BBY earnings call
13:00: NVDA Analyst Day
14:15: ORCL presents at Knight Capital Investor Conference
14:15: IBM presents at Knight Capital Investor Conference
15:15: GS presents at Knight Capital Investor Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ADBE earnings call
Post-market EPS: ADBE (.34/695.8M)
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 US dollar snapped a two-day rally (Euro is up 0.75% to 1.3903; British Pound is up 0.87% to 1.6461) due to stronger German and Euro-zone confidence, higher UK CPI, and chatter that BRIC countries may diversify their reserves among themselves in order to reduce dollar dependence. Commodities have reversed some of Monday’s decline on the weaker dollar (Crude is up 1.8% to 71.94). Treasury bonds are little changed. Asian markets closed lower except for India, which reversed opening losses (Japan down 2.8%, Hong Kong down 1.8%, Australia down 1.7%, South Korea down 0.95%, India up 0.55%). Financial, commodity, and energy shares led the decline in Asia following the sell-off on Wall Street on Monday. European markets are up 0.50% near the highs of the session. Mining shares (down 0.25%) continue to lag while banks (up 1.0%) and defensive sectors (food retail and pharmaceuticals) outperform. (UBSN.VX) traded lower after being placed on review for possible downgrade by Moody's. Natl Bank of Greece (ETE.GA) proposes a rights issue to raise approx €1.25B. The shares fell and pressured other Greek bank shares. Rio Tinto (RIO.LN) said trading outlook for rest of 2009 remains uncertain.
Research Calls/Market Moving News:
BAC (13.33): Sandler O’Neill analyst Jeff Harte comments on BAC’s May Master Trust data: “BAC: Net charge-offs were 12.50%, compared with 10.47% in April and the current three month average of 10.76%. This 203 basis point sequential monthly increase was more than we anticipated and suggests that our 10.75% domestic credit card net charge-off rate for 2Q09 may be low. It is noteworthy that BAC's 1Q09 reported domestic NCO ratio of 9.81% was 91 basis points below the trust's same period average. Delinquencies (30+ days) reported were 7.95%, versus 8.01% in April and the current three-month average of 7.94%. The portfolio yield increased to 19.40%, compared with 18.41% in April and a current three-month average of 18.73%. The excess spread decreased to 3.77%, from 4.72% last month and the three-month average of 4.76%.
RIMM (80.38): Research In Motion target increased to $92 from $85 at Thomas Weisel Partners: Firm sees a solid May quarter and an in line Aug outlook, with continued market share gains as RIMM rolls out several upgrades and "new" platforms. Target increased due to recent increases in the market multiple. Rating is overweight.
RIMM (80.38): Research In Motion to sell BlackBerry Tour later this summer: The smartphone will be available at Sprint (S) for $199.99 with a new line of service or eligible upgrade, two-year service agreement, and $50 instant rebate and $100 mail-in rebate. The phone will operate globally. Bloomberg reports that co-CEO Jim Balsillie says the Tour will be sold in Canada through BCE (BCE.CN) and Telus (T.CN). Balsillie declines to comment on when RIMM might introduce a touchscreen Storm with a pullout keyboard.
IBM (107.62): IBM target raised to $140 from $120 at Thomas Weisel Partners: Firm notes the company's recurring revenue base makes IBM less cyclical, and believes low single digit revenue growth, modest margin expansion, acquisitions, and share repurchases support high single digit EPS growth. Estimates are unchanged. Rating is overweight.
Canaccord Adams initiates FFIV, BRCD, CSCO, EMC, NTAP with buy ratings: F5 Networks (FFIV) initiated speculative buy with $41.50 target. Brocade (BRCD) initiated buy with $10 target. Cisco Systems (CSCO) initiated buy with $23 target. EMC (EMC) initiated buy with $15 target. NetApp (NTAP) initiated buy with $22.50 target.
MSFT (23.42): Microsoft target increased to $26 from $22 at Jefferies: Firm notes that Windows 7 is due out on 22-Oct and expects a large, rapid PC upgrade cycle starting in late in 2010. Buy rating is reiterated
CMI (34.02): Cummins initiated buy at Goldman Sachs: Target is $42.
LZB (3.64): La-Z-Boy reports Q4 EPS $0.07 ex-items vs Reuters ($0.11): Company reports revenues of $284.5M vs Reuters $296.5M. Shares are trading up 25%.
Secondary Issuance: HAR (9M share secondary); MMR (11M share secondary); BRKR (35M share secondary), GWR (4M share secondary).
Thursday, June 11, 2009
June 11, 2009: Morning Call
June 11, 2009: Morning Call
Fair Value: SP500 – 939.10; NDX: 1495.48; DOW: 8739.64
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: DLM (0.26/950.7M)
04:00: ECB publishes June Monthly Report
08:30: US Retail Sales (May): 0.5%; Less Autos: 0.2%
08:30: Initial Jobless Claims: 615,000; Continuing Claims: 6,780,000
09:00: LDK presents at Deutsche Bank Alternative Energy Conference
09:10: BNI presents at Bank of America Transportation Conference
09:40: CSCO presents at William Blair Conference
09:40: CELG presents at Goldman Healthcare Conference
10:00: Business Inventories (April): -1.0%
10:00: BAC CEO Ken Lewis testifies on the purchase of Merrill
10:20: GILD presents at Goldman Healthcare Conference
10:30: EIA Natural Gas Storage Change: 110bcf
11:00: Fed’s Fisher speaks on the economy
11:05: NSC presents at Bank of America Transportation Conference
11:35: V presents at UBS Conference
13:05: Fed’s Lockhart speaks on the economy
22:00: Chinese Retail Sales (May): 15.0% YoY
22:00: Chinese Industrial Production (May): 7.7% YoY
Post-market EPS: NSM (-0.01/273.3M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value at 7:45am ET. Trading is on the light side as commodities (modestly higher), treasury bonds (modestly lower), equity futures (modestly higher), and FOREX (dollar modestly lower) are all seeing modest price changes this morning. Crude oil is trading above 72 after the IEA raised its demand forecast for the first time in 10 months. Asian markets closed mixed with most staying close to unchanged (Japan down 0.10%, Hong Kong up 0.03%, Australia up 0.57%, Shanghai down 0.94%, Taiwan up 1.63%, India down 0.36%). Commodity stocks rose once again, while defensive stocks fell. Advancers led decliners by more than 2-to-1 in Taiwan. Taiwan Semiconductor Manufacturing (2330.TT) ended little changed after saying May sales fell (16%) y/y. Hong Kong reversed early declines. In Japan, the Nikkei hung around 10,000, exceeding the level for the first time since October. European markets are up 0.25% to 0.50% in a quiet range bound trading morning session. The ECB said it is expecting Euro-zone growth to resume in mid-2010.
Research Calls/Market Moving News:
DELL (12.94): Dell looking to acquire a "significant-sized company" in the coming months – WSJ: The Journal, which notes that Dell officials have already said publicly that they want to do more deals, cites comments from a source familiar with CEO Michael Dell's thinking. People familiar with the situation also tell the paper that CFO Brian Gladden recently indicated that Dell wants to expand its data-storage and tech-services businesses. The article goes on to discuss the company's recent $1B bond sale, the hiring of former IBM M&A chief David Johnson and the heightened competition for tech deals.
MA (173.60): MasterCard initiated buy at Piper Jaffray. Target is $222. “We believe the current valuation of MasterCard's shares offers investors a compelling entry point relative to its long-term earnings power potential. MasterCard's valuation is essentially in-line with the overall market multiple for the S&P 500 despite having a well above average long-term earnings growth profile and manageable risks to earnings, in our view. • Earnings upside potential, driven by pricing benefits and operating leverage. Our '09/'10/'11 EPS estimates of $10.86/$13.10/$16.92 are well above consensus of $10.47/$12.26/$13.53. We believe others are underestimating pricing benefits on access fees, expense leverage, and a rebound in spending/travel. • Revenue growth, a key to valuation, is poised to accelerate significantly by the 4Q09, in our view. We believe a key catalyst for the shares of MasterCard will be accelerating revenue growth, which we expect to hit 8% in the 4Q09. Our confidence is bolstered by easier comps, rebounding gas prices, the lapping of currency headwinds, and stabilizing retail sales and cross-border travel trends. • International debit and credit and global prepaid provide substantial long-term secular growth potential for MasterCard. We believe the attractive international secular growth opportunity has been overlooked amidst the global economic downturn and regulatory issues in the U.S. • MasterCard's valuation discount vs. Visa is near its widest ever. We expect MasterCard to trade at a discount to Visa over the long-term, largely because of MasterCard's smaller debit footprint and higher risk to common shareholders on any interchange litigation settlement. However, MasterCard's shares are currently trading at the high-end of their historical discount range vs. Visa's shares, suggesting to us that the valuation discount is unlikely to widen much further and could narrow as MasterCard continues to exceed expectations and its revenue growth accelerates.
Crude Oil (72.02): IEA raises global oil-demand forecast for the first time in 10 months. Estimate is increased 120,000 barrels a day to 83.3 million barrels a day, driven by consumption in the United States and China. Consumption worldwide will contract 2.9% versus last year, the biggest drop since 1981, according to Bloomberg.
Foreclosure Data: RealtyTrac says foreclosure filings down 6% month over month and up 18% year over year.
VMC (43.97): Vulcan Materials (VMC) cuts dividend to $0.25 from $0.49; announces 11.5M share secondary, guides Q2 EPS to $0.15-0.30 vs Reuters $0.44, guides full year EPS to $0.70-1.00 vs Reuters $1.03.
FDX (57.25): FedEx Q4, f10 estimates, target reduced at JPMorgan: The firm expects Q4 EPS to the lower end of guidance of $0.45-$0.70 as the firm does not believe FDX saw an uptick in transport demand during the quarter, and expects f10 guidance to be below consensus. Q4 EPS reduced to $0.48 from $0.56; f10 EPS to $2.60 from $2.85. Reuters consensus is $0.53 and $3.39, respectively. First Call is $3.37 for f10. The target is reduced to $60 from $66; rating remains neutral.
BAC (11.98): Bank of America upgraded to outperform from market perform at Keefe, Bruyette & Woods: Target increased to $16.50 from $12. The firm cites valuation and an improved balance sheet.
ATPG (9.27): ATP Oil & Gas (ATPG) announces 7.25M share secondary offering through JPMorgan.
GMGMQ (1.59): General Motors comments on stock price and volume: Company says that its management has noticed a recent elevation in the volume and price of its common stock. Adds that while it has no control over the market or its stock price, management strongly believes that any recovery for the common shareholders in the Chapter 11-bankruptcy process is highly unlikely, even in the most optimistic of scenarios. The stock has closed higher in each of the last six trading days, and is up more than 160% during that period.
Fair Value: SP500 – 939.10; NDX: 1495.48; DOW: 8739.64
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: DLM (0.26/950.7M)
04:00: ECB publishes June Monthly Report
08:30: US Retail Sales (May): 0.5%; Less Autos: 0.2%
08:30: Initial Jobless Claims: 615,000; Continuing Claims: 6,780,000
09:00: LDK presents at Deutsche Bank Alternative Energy Conference
09:10: BNI presents at Bank of America Transportation Conference
09:40: CSCO presents at William Blair Conference
09:40: CELG presents at Goldman Healthcare Conference
10:00: Business Inventories (April): -1.0%
10:00: BAC CEO Ken Lewis testifies on the purchase of Merrill
10:20: GILD presents at Goldman Healthcare Conference
10:30: EIA Natural Gas Storage Change: 110bcf
11:00: Fed’s Fisher speaks on the economy
11:05: NSC presents at Bank of America Transportation Conference
11:35: V presents at UBS Conference
13:05: Fed’s Lockhart speaks on the economy
22:00: Chinese Retail Sales (May): 15.0% YoY
22:00: Chinese Industrial Production (May): 7.7% YoY
Post-market EPS: NSM (-0.01/273.3M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 3 points above fair value while the NASDAQ futures are trading 5 points above fair value at 7:45am ET. Trading is on the light side as commodities (modestly higher), treasury bonds (modestly lower), equity futures (modestly higher), and FOREX (dollar modestly lower) are all seeing modest price changes this morning. Crude oil is trading above 72 after the IEA raised its demand forecast for the first time in 10 months. Asian markets closed mixed with most staying close to unchanged (Japan down 0.10%, Hong Kong up 0.03%, Australia up 0.57%, Shanghai down 0.94%, Taiwan up 1.63%, India down 0.36%). Commodity stocks rose once again, while defensive stocks fell. Advancers led decliners by more than 2-to-1 in Taiwan. Taiwan Semiconductor Manufacturing (2330.TT) ended little changed after saying May sales fell (16%) y/y. Hong Kong reversed early declines. In Japan, the Nikkei hung around 10,000, exceeding the level for the first time since October. European markets are up 0.25% to 0.50% in a quiet range bound trading morning session. The ECB said it is expecting Euro-zone growth to resume in mid-2010.
Research Calls/Market Moving News:
DELL (12.94): Dell looking to acquire a "significant-sized company" in the coming months – WSJ: The Journal, which notes that Dell officials have already said publicly that they want to do more deals, cites comments from a source familiar with CEO Michael Dell's thinking. People familiar with the situation also tell the paper that CFO Brian Gladden recently indicated that Dell wants to expand its data-storage and tech-services businesses. The article goes on to discuss the company's recent $1B bond sale, the hiring of former IBM M&A chief David Johnson and the heightened competition for tech deals.
MA (173.60): MasterCard initiated buy at Piper Jaffray. Target is $222. “We believe the current valuation of MasterCard's shares offers investors a compelling entry point relative to its long-term earnings power potential. MasterCard's valuation is essentially in-line with the overall market multiple for the S&P 500 despite having a well above average long-term earnings growth profile and manageable risks to earnings, in our view. • Earnings upside potential, driven by pricing benefits and operating leverage. Our '09/'10/'11 EPS estimates of $10.86/$13.10/$16.92 are well above consensus of $10.47/$12.26/$13.53. We believe others are underestimating pricing benefits on access fees, expense leverage, and a rebound in spending/travel. • Revenue growth, a key to valuation, is poised to accelerate significantly by the 4Q09, in our view. We believe a key catalyst for the shares of MasterCard will be accelerating revenue growth, which we expect to hit 8% in the 4Q09. Our confidence is bolstered by easier comps, rebounding gas prices, the lapping of currency headwinds, and stabilizing retail sales and cross-border travel trends. • International debit and credit and global prepaid provide substantial long-term secular growth potential for MasterCard. We believe the attractive international secular growth opportunity has been overlooked amidst the global economic downturn and regulatory issues in the U.S. • MasterCard's valuation discount vs. Visa is near its widest ever. We expect MasterCard to trade at a discount to Visa over the long-term, largely because of MasterCard's smaller debit footprint and higher risk to common shareholders on any interchange litigation settlement. However, MasterCard's shares are currently trading at the high-end of their historical discount range vs. Visa's shares, suggesting to us that the valuation discount is unlikely to widen much further and could narrow as MasterCard continues to exceed expectations and its revenue growth accelerates.
Crude Oil (72.02): IEA raises global oil-demand forecast for the first time in 10 months. Estimate is increased 120,000 barrels a day to 83.3 million barrels a day, driven by consumption in the United States and China. Consumption worldwide will contract 2.9% versus last year, the biggest drop since 1981, according to Bloomberg.
Foreclosure Data: RealtyTrac says foreclosure filings down 6% month over month and up 18% year over year.
VMC (43.97): Vulcan Materials (VMC) cuts dividend to $0.25 from $0.49; announces 11.5M share secondary, guides Q2 EPS to $0.15-0.30 vs Reuters $0.44, guides full year EPS to $0.70-1.00 vs Reuters $1.03.
FDX (57.25): FedEx Q4, f10 estimates, target reduced at JPMorgan: The firm expects Q4 EPS to the lower end of guidance of $0.45-$0.70 as the firm does not believe FDX saw an uptick in transport demand during the quarter, and expects f10 guidance to be below consensus. Q4 EPS reduced to $0.48 from $0.56; f10 EPS to $2.60 from $2.85. Reuters consensus is $0.53 and $3.39, respectively. First Call is $3.37 for f10. The target is reduced to $60 from $66; rating remains neutral.
BAC (11.98): Bank of America upgraded to outperform from market perform at Keefe, Bruyette & Woods: Target increased to $16.50 from $12. The firm cites valuation and an improved balance sheet.
ATPG (9.27): ATP Oil & Gas (ATPG) announces 7.25M share secondary offering through JPMorgan.
GMGMQ (1.59): General Motors comments on stock price and volume: Company says that its management has noticed a recent elevation in the volume and price of its common stock. Adds that while it has no control over the market or its stock price, management strongly believes that any recovery for the common shareholders in the Chapter 11-bankruptcy process is highly unlikely, even in the most optimistic of scenarios. The stock has closed higher in each of the last six trading days, and is up more than 160% during that period.
Wednesday, June 10, 2009
June 10, 2009: Morning Call
June 10, 2009: Morning Call
Fair Value: SP500 – 942.15; NDX: 1501.77; DOW: 8760.76
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
07:00: MBA Mortgage Applications
08:20: ENER presents at Deutsche Bank Alternative Energy Conference
08:30: US Trade Balance (April): -28.9B
08:30: HD Analyst Day
09:00: MA presents at William Blair Conference
09:00: SPWRA presents at Deutsche Bank Alternative Energy Conference
10:00: NYB Annual Meeting
10:00: Fed’s Lacker speaks on the economy
10:15: AMAT presents at UBS Tech Conference
10:30: V presents at William Blair Conference
10:30: DOE Crude Oil and Gasoline Inventories
10:45: GE presents at Deutsche Bank Alternative Energy Conference
12:00: AGU Investor Day
12:15: Fed’s Duke speaks on community development
13:00: Treasury auctions 19 billion in 10 year notes.
13:00: YHOO presents at RBC Tech Conference
13:30: T presents at RBC Tech Conference
13:50: VRTX presents at Goldman Healthcare Conference
14:00: US Monthly Budget Statement (May): -175.0B
14:00: Fed’s Beige Book
14:30: CAT Annual Meeting
17:00: MSFT presents at RBC Tech Conference
18:30: NVLS presents at RBC Tech Conference
Post-market EPS: MW (0.00/459.3M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 10 points above fair value while the NASDAQ futures are trading 13 points above fair value at 7:45am ET. Global equity and commodity markets are higher as another strong rally originates out of Asia. Asian markets closed sharply higher with markets in Hong Kong surging 4%, the biggest gain since May 27 and erasing a two-day decline of 3.3%. Banks and material stocks paced the rally in Hong Kong with Bank of China rallying 8.3% and Aluminum Corp of China gaining 8.8%. Producer and Consumer prices fell more than expected easing concerns about increased inflation and higher interest rates due to the significant fiscal stimulus programs. Other markets in Asia gained: Japan up 2.09%, Australia up 2.27%, Shanghai up 0.98%, South Korea up 3.57%, India up 2.25%). European markets are up 1.9% to 2.2% with commodity and financial sectors leading the gains. Advancers on the FTSE 100 lead decliners 19-1. Commodity prices are up 1.0% to 2.0% due to a weaker US dollar. The USD is down 0.50% against the Euro (1.415) on speculation that Russia will reduce holdings of US Treasuries (Note the recent trend is equity market are stronger when the US Dollar is weaker). Bond futures are down 15/32 ahead of the 10-year note auction.
Research Calls/Market Moving News:
RIMM (82.02): Research In Motion 6-month target increased to $96 from $85 at Goldman Sachs: The firm's checks indicate continued good product sales and raises its estimates to further above consensus. The rating remains Conviction Buy.
AAPL (142.72): Collins Stewart comments on iPhone production following checks:
Firm's checks indicate that iPhone production for the Jun quarter has been adjusted down to ~4.6M units from 5.2M units. Collins Stewart notes that the rolling forecast for the Sep quarter is 6.5-7.5M units, with the midpoint reflecting flat shipments y/y. Firm cautions that if the current build plans hold, they present a risk to Apple. Rating is buy with a target of $170
GOOG (453.62): DoJ still investigating Google's book search settlement – WSJ: Recall that the Journal reported back on 28-Apr that the DoJ had held discussions with Google about its proposed book-search settlement with the Authors Guild and the Association of American Publishers that allowed the company to make books available for free online. The paper now says that the DoJ's antitrust division has sent certain publishers formal requests for information about the settlement.
SINA (32.93): Sina reports Q1 non-GAAP EPS $0.23 vs Reuters $0.22: Company reports revenues of $73.8M vs Reuters $75.5M. Advertising revenues decreased 10% year over year to $43.2M, within the company's guidance of between $43.0M and $46.0M. Guides Q2 revenues to $85-89M vs Reuters $93.6M. Guides advertising revenues to be between $55M and $58M and non-advertising revenues to be between $30M and $31M. Citigroup and Pali Capital downgrade SINA shares due to the soft earnings. SINA shares are trading down 7.5% in the pre-market.
HD (24.35): Home Depot boosts adjusted EPS guidance range to (20%)-(26%) vs prior expectation of (26%)
Cash for Clunkers passes House, 298-199; Senate vote still pending - Detroit News: Objections from Senate appropriators and a group of Senators who say the House proposal doesn't do enough to improve fuel efficiency on the nation's highways still need to be overcome.
Obama administration to seek power for SEC to force banks to give shareholders votes on executive-pay packages – Bloomberg: People familiar with the matter say the proposal may be set out in an announcement on changing financial firms’ pay practices as soon as today. The "say-on-pay" votes, which would cover the range from salaries to bonuses and severance packages, would be nonbinding.
CBG (8.14): CB Richard Ellis (CBG) agrees to sell 13.44M Class A shares to Paulson & Company; also plans $50M Class A secondary offering through JPMorgan
Secondary Issuance: LHO (6.5 million share secondary), AMP (900 million dollar secondary), SGY (6 million share secondary).
Fair Value: SP500 – 942.15; NDX: 1501.77; DOW: 8760.76
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
07:00: MBA Mortgage Applications
08:20: ENER presents at Deutsche Bank Alternative Energy Conference
08:30: US Trade Balance (April): -28.9B
08:30: HD Analyst Day
09:00: MA presents at William Blair Conference
09:00: SPWRA presents at Deutsche Bank Alternative Energy Conference
10:00: NYB Annual Meeting
10:00: Fed’s Lacker speaks on the economy
10:15: AMAT presents at UBS Tech Conference
10:30: V presents at William Blair Conference
10:30: DOE Crude Oil and Gasoline Inventories
10:45: GE presents at Deutsche Bank Alternative Energy Conference
12:00: AGU Investor Day
12:15: Fed’s Duke speaks on community development
13:00: Treasury auctions 19 billion in 10 year notes.
13:00: YHOO presents at RBC Tech Conference
13:30: T presents at RBC Tech Conference
13:50: VRTX presents at Goldman Healthcare Conference
14:00: US Monthly Budget Statement (May): -175.0B
14:00: Fed’s Beige Book
14:30: CAT Annual Meeting
17:00: MSFT presents at RBC Tech Conference
18:30: NVLS presents at RBC Tech Conference
Post-market EPS: MW (0.00/459.3M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 10 points above fair value while the NASDAQ futures are trading 13 points above fair value at 7:45am ET. Global equity and commodity markets are higher as another strong rally originates out of Asia. Asian markets closed sharply higher with markets in Hong Kong surging 4%, the biggest gain since May 27 and erasing a two-day decline of 3.3%. Banks and material stocks paced the rally in Hong Kong with Bank of China rallying 8.3% and Aluminum Corp of China gaining 8.8%. Producer and Consumer prices fell more than expected easing concerns about increased inflation and higher interest rates due to the significant fiscal stimulus programs. Other markets in Asia gained: Japan up 2.09%, Australia up 2.27%, Shanghai up 0.98%, South Korea up 3.57%, India up 2.25%). European markets are up 1.9% to 2.2% with commodity and financial sectors leading the gains. Advancers on the FTSE 100 lead decliners 19-1. Commodity prices are up 1.0% to 2.0% due to a weaker US dollar. The USD is down 0.50% against the Euro (1.415) on speculation that Russia will reduce holdings of US Treasuries (Note the recent trend is equity market are stronger when the US Dollar is weaker). Bond futures are down 15/32 ahead of the 10-year note auction.
Research Calls/Market Moving News:
RIMM (82.02): Research In Motion 6-month target increased to $96 from $85 at Goldman Sachs: The firm's checks indicate continued good product sales and raises its estimates to further above consensus. The rating remains Conviction Buy.
AAPL (142.72): Collins Stewart comments on iPhone production following checks:
Firm's checks indicate that iPhone production for the Jun quarter has been adjusted down to ~4.6M units from 5.2M units. Collins Stewart notes that the rolling forecast for the Sep quarter is 6.5-7.5M units, with the midpoint reflecting flat shipments y/y. Firm cautions that if the current build plans hold, they present a risk to Apple. Rating is buy with a target of $170
GOOG (453.62): DoJ still investigating Google's book search settlement – WSJ: Recall that the Journal reported back on 28-Apr that the DoJ had held discussions with Google about its proposed book-search settlement with the Authors Guild and the Association of American Publishers that allowed the company to make books available for free online. The paper now says that the DoJ's antitrust division has sent certain publishers formal requests for information about the settlement.
SINA (32.93): Sina reports Q1 non-GAAP EPS $0.23 vs Reuters $0.22: Company reports revenues of $73.8M vs Reuters $75.5M. Advertising revenues decreased 10% year over year to $43.2M, within the company's guidance of between $43.0M and $46.0M. Guides Q2 revenues to $85-89M vs Reuters $93.6M. Guides advertising revenues to be between $55M and $58M and non-advertising revenues to be between $30M and $31M. Citigroup and Pali Capital downgrade SINA shares due to the soft earnings. SINA shares are trading down 7.5% in the pre-market.
HD (24.35): Home Depot boosts adjusted EPS guidance range to (20%)-(26%) vs prior expectation of (26%)
Cash for Clunkers passes House, 298-199; Senate vote still pending - Detroit News: Objections from Senate appropriators and a group of Senators who say the House proposal doesn't do enough to improve fuel efficiency on the nation's highways still need to be overcome.
Obama administration to seek power for SEC to force banks to give shareholders votes on executive-pay packages – Bloomberg: People familiar with the matter say the proposal may be set out in an announcement on changing financial firms’ pay practices as soon as today. The "say-on-pay" votes, which would cover the range from salaries to bonuses and severance packages, would be nonbinding.
CBG (8.14): CB Richard Ellis (CBG) agrees to sell 13.44M Class A shares to Paulson & Company; also plans $50M Class A secondary offering through JPMorgan
Secondary Issuance: LHO (6.5 million share secondary), AMP (900 million dollar secondary), SGY (6 million share secondary).
Tuesday, June 9, 2009
June 9, 2009: Morning Call
June 9, 2009: Morning Call
Fair Value: SP500 – 938.87; NDX: 1488.66; DOW: 8762.69
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: PBY (.07/497.6M); TITN (.13/161.3M)
08:30: NTRS presents at William Blair Growth Stock Conference
10:00: Wholesale Inventories (April): -1.1%
10:30: Treasury Secretary Geithner testifies to the Senate on the Treasury budget
11:30: AGU presents at RBC Mining Conference
12:15: BRCM presents at UBS Tech Conference
12:45: QCOM presents at UBS Tech Conference
12:45: GOOG presents at CSFB Media and Communications Conference
13:30: VMW presents at RBC Tech Conference
14:15: EBAY presents at CSFB Media and Communications Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
22:00: Chinese Producer Price Index (May): -7.0%
22:00: Chinese Consumer Price Index (May): -1.4% YoY
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 1 point above fair value while the NASDAQ futures are trading 5 points above fair value at 7:30am ET. European markets are flat to modestly higher (up 0.35%) after being up as much as 1.0% to 1.5% on the open. Technology stocks (NOK, STM) outperform in Europe after TXN guided Q2 earnings above current consensus. Asian markets closed lower (Japan down 0.80%, Hong Kong down 1.07%, Australia down 0.91%, South Korea down 1.5%, India up 3.1%). Technology stocks outperformed while commodity stocks underperformed. Softbank (9984.JP) gained after Apple (AAPL) halved the price of its entry-level iPhone 3GS. Resource stocks led Australia down. India bucked the trend lower with strong gains across the board and closing near a new relative high.
Research Calls/Market Moving News:
Treasury said to approve ten banks for TARP repayment – Bloomberg: Geithner is expected to announce the 10 banks at 10:30 this morning. JPM, GS, MS, AXP, STT are expected to be among the banks approved.
AAPL (143.85): Apple estimates increased at Goldman Sachs: The firm notes the lower priced iPhone 3G and MacBook offerings should draw low-end users, and sees the iPhone announcements as a positive for AT&T (T). AAPL C09 estimates increased to $5.31 from $5.25; c10 to $5.90 from $5.80. Target increased to $145 from $130; rating remains neutral.
TXN (19.77): Texas Instruments (TXN) guides Q2 EPS $0.14-0.22 vs prior $0.01-0.15 and Reuters $0.12, First Call $0.10.
NYX (29.47): NYSE Euronext wants regulators to treat dark pools like exchanges – Bloomberg: In written testimony to be delivered to the House Financial Services Committee today, an NYX executive says the current disparity in regulation puts exchanges at a competitive disadvantage to broker-owned systems like Goldman Sachs (GS)'s Sigma X.
Obama administration rethinking its approach to financial regulation – WSJ: People familiar with the matter say the White House has decided to aim for the more achievable political goal of tougher rules rather than regulatory consolidation. The ideas of merging the Commodity Futures Trading Commission and the SEC, or asking the Federal Reserve, FDIC, or the Office of the Comptroller of the Currency to cede their primary authority to supervise banks are probably off the table. The Fed is likely to be strengthened, and unregulated parts of Wall Street will still undergo regulation for the first time.
X (35.06); AKS (17.40); NUE (46.76): Morgan Stanley upgrades AKS, X, downgrades NUE: Upgrade: U.S. Steel (X) upgraded to overweight from equal-weight; target is $45. AK Steel (AKS) upgraded to equal-weight from underweight; target is $19. Downgrade: Nucor (NUE) downgraded to equal-weight from overweight
CBL (7.56): CBL & Associates plans 50M share secondary offering through Merrill Lynch and Wachovia, guides f09 FFO to $2.41-2.53 vs Reuters $2.96.
Appraisals wreaking havoc on real estate market – WSJ: The Journal reports that appraisals are becoming one of the most significant obstacles for people looking to sell their homes, refinance their mortgages or tap into their home-equity loans. The article notes that while during the housing boom appraisers complained of pressure from lenders to inflate home-value estimates, there are now concerns that the pendulum has swung too far in the other direction. According to the Journal, after suffering big losses, lenders are now pressing appraisers to be much more conservative, while the appraisal process itself has become significantly more complicated by the volatility in home prices, as well as the depressed number of comparable transactions.
HIG (14.79): Hartford Financial downgraded to hold from buy at Citi: Target cut to $19 from $21. Firm says it sees fewer catalysts outside of a continued market rally. The analyst believes that the expected Q2 reversal of unrealized losses has already been reflected in the stock.
Fair Value: SP500 – 938.87; NDX: 1488.66; DOW: 8762.69
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: PBY (.07/497.6M); TITN (.13/161.3M)
08:30: NTRS presents at William Blair Growth Stock Conference
10:00: Wholesale Inventories (April): -1.1%
10:30: Treasury Secretary Geithner testifies to the Senate on the Treasury budget
11:30: AGU presents at RBC Mining Conference
12:15: BRCM presents at UBS Tech Conference
12:45: QCOM presents at UBS Tech Conference
12:45: GOOG presents at CSFB Media and Communications Conference
13:30: VMW presents at RBC Tech Conference
14:15: EBAY presents at CSFB Media and Communications Conference
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
22:00: Chinese Producer Price Index (May): -7.0%
22:00: Chinese Consumer Price Index (May): -1.4% YoY
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 1 point above fair value while the NASDAQ futures are trading 5 points above fair value at 7:30am ET. European markets are flat to modestly higher (up 0.35%) after being up as much as 1.0% to 1.5% on the open. Technology stocks (NOK, STM) outperform in Europe after TXN guided Q2 earnings above current consensus. Asian markets closed lower (Japan down 0.80%, Hong Kong down 1.07%, Australia down 0.91%, South Korea down 1.5%, India up 3.1%). Technology stocks outperformed while commodity stocks underperformed. Softbank (9984.JP) gained after Apple (AAPL) halved the price of its entry-level iPhone 3GS. Resource stocks led Australia down. India bucked the trend lower with strong gains across the board and closing near a new relative high.
Research Calls/Market Moving News:
Treasury said to approve ten banks for TARP repayment – Bloomberg: Geithner is expected to announce the 10 banks at 10:30 this morning. JPM, GS, MS, AXP, STT are expected to be among the banks approved.
AAPL (143.85): Apple estimates increased at Goldman Sachs: The firm notes the lower priced iPhone 3G and MacBook offerings should draw low-end users, and sees the iPhone announcements as a positive for AT&T (T). AAPL C09 estimates increased to $5.31 from $5.25; c10 to $5.90 from $5.80. Target increased to $145 from $130; rating remains neutral.
TXN (19.77): Texas Instruments (TXN) guides Q2 EPS $0.14-0.22 vs prior $0.01-0.15 and Reuters $0.12, First Call $0.10.
NYX (29.47): NYSE Euronext wants regulators to treat dark pools like exchanges – Bloomberg: In written testimony to be delivered to the House Financial Services Committee today, an NYX executive says the current disparity in regulation puts exchanges at a competitive disadvantage to broker-owned systems like Goldman Sachs (GS)'s Sigma X.
Obama administration rethinking its approach to financial regulation – WSJ: People familiar with the matter say the White House has decided to aim for the more achievable political goal of tougher rules rather than regulatory consolidation. The ideas of merging the Commodity Futures Trading Commission and the SEC, or asking the Federal Reserve, FDIC, or the Office of the Comptroller of the Currency to cede their primary authority to supervise banks are probably off the table. The Fed is likely to be strengthened, and unregulated parts of Wall Street will still undergo regulation for the first time.
X (35.06); AKS (17.40); NUE (46.76): Morgan Stanley upgrades AKS, X, downgrades NUE: Upgrade: U.S. Steel (X) upgraded to overweight from equal-weight; target is $45. AK Steel (AKS) upgraded to equal-weight from underweight; target is $19. Downgrade: Nucor (NUE) downgraded to equal-weight from overweight
CBL (7.56): CBL & Associates plans 50M share secondary offering through Merrill Lynch and Wachovia, guides f09 FFO to $2.41-2.53 vs Reuters $2.96.
Appraisals wreaking havoc on real estate market – WSJ: The Journal reports that appraisals are becoming one of the most significant obstacles for people looking to sell their homes, refinance their mortgages or tap into their home-equity loans. The article notes that while during the housing boom appraisers complained of pressure from lenders to inflate home-value estimates, there are now concerns that the pendulum has swung too far in the other direction. According to the Journal, after suffering big losses, lenders are now pressing appraisers to be much more conservative, while the appraisal process itself has become significantly more complicated by the volatility in home prices, as well as the depressed number of comparable transactions.
HIG (14.79): Hartford Financial downgraded to hold from buy at Citi: Target cut to $19 from $21. Firm says it sees fewer catalysts outside of a continued market rally. The analyst believes that the expected Q2 reversal of unrealized losses has already been reflected in the stock.
Monday, June 8, 2009
June 8, 2009: Morning Call
June 8, 2009: Morning Call
Fair Value: SP500 – 939.80; NDX: 1493.41; DOW: 8759.79
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
04:30: Euro-zone Sentix Investor Confidence (June): -31.0 (actual: -27)
10:15: MSFT presents at UBS Tech Conference
12:30: Fed’s Tarullo speaks on financial regulation
13:00: AAPL Worldwide Developers Conference Keynote
17:00: TXN Q2 2009 Guidance Call
Post-market EPS: PLL (.42/562.5M); ZQK (.06/502.4)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 9 points below fair value while the NASDAQ futures are trading 15 points below fair value at 7:45am ET. The US dollar is almost 1% higher against the Euro (1.385) after S&P downgraded Ireland’s sovereign credit rating for a second time this year; the dollar is also being underpinned by increased expectations that the Federal Reserve will raise interest rates later this year (Fed Fund futures are currently expecting a 30% chance that the Fed will raise rates 25 basis points by the September meeting. The odds in the beginning of last week were 15%). European markets are down 1.25% to 1.5% with financial and mining shares leading the decline. Irish markets are down 3% on the S&P downgrade. Early European Parliament election results showed that conservative center right and nationalist parties on the extreme right, held or gained support. In the UK Prime Minister Brown faces increased pressure as a disappointing showing in the European election compounded the poor results of the UK's local elections. Decliners on the FTSE 100 lead advancers 4-1. Barclays (BARC.LN) confirms it's held talks with a number of parties including Blackrock (BLK) about both iShares and BGI and says talks on going. Asian markets closed mixed (Japan up 1.0%, Hong Kong down 2.2%, Australia up 0.93%, Taiwan down 3.3%, India down 2.9%). A weaker yen, as well as better-than-expected US jobs figures, lifted automotive shares in Japan while shipping shares fell after a fall in the Baltic Dry Index. Toyota (7203.JP) gained on a report it plans ¥100B in production cuts by 2012.
Research Calls/Market Moving News:
Republic of Ireland downgraded to AA from AA+; outlook negative at Standard & Poor's
GOOG (444.32): Google downgraded to hold from buy at Benchmark Company LLC: Target is unchanged at $430. Firm cites checks, which indicate softening in online ad market. “Our channel checks reveal a softening in online advertising trends. There was a spurt of activity from March through mid-May. But visibility remains low and indicators for June through August are negative, implying at least a pause. Large advertisers appear to be reducing commitments heading into the summer. This pause could be due to advertisers awaiting the results of the TV upfront, exaggerated seasonal softness, or both. We are hearing that April and May were solid relative to expectations but indications for June through August are poor, thus tempering recent momentum.”
AAPL (144.67): Apple's Steve Jobs rumored for an early comeback to unveil the company's new iPhone - London Times: The article notes that technology blogs have speculated Jobs will appear for the software developers conference in San Francisco keynote speech scheduled for tomorrow (8-Jun) where the new version of the company's iPhone is expected to be unveiled. The article does not provide any details, but simply notes the widespread speculation of an appearance. Apple has reportedly said that Jobs in not expected back until the end of June.
GS (149.01); MS (30.97): Barron's Follow Up positive on Goldman (GS) and Morgan Stanley (MS): Barron's notes that shares of Wall Street's two surviving independent brokers are thriving and Goldman could be having its best quarter since 2007, with profits exceeding $5/share per Barclays' analyst Roger Freeman's new estimates.
BLK (163.74); BX (10.92): BlackRock added to Conviction Buy List; Blackstone (BX) upgraded at Goldman Sachs: the target on BLK is increased to $190 from $185. BX is upgraded to buy from neutral; target remains $13
BAC (11.86): Bank of America repayment of TARP expected in Q3, Q4, says Morgan Stanley: The firm expects the banks which will be allowed to repay first will be JPMorgan (JPM), processor banks, and possibly BB&T (BBT) and US Bancorp (USB). The rating on BAC remains overweight; target remains $32.
HDB (102.50): Citi may sell $1.71B stake in HDFC - Economic Times:
The bank continues to deny it will sell its 11.73% stake in India's largest mortgage company, and the article does not cite sources who say otherwise. But most people feel the bank's reason for its strategic stake is gone, and India is unlikely to allow Citi to own a substantial part of HDFC Bank. Nonetheless, some people say Citi will likely keep it’s holding because Asia is its only growth engine
US to allow some big banks to repay aid - Washington Post: JPMorgan Chase (JPM), Goldman Sachs (GS), American Express (AXP), and other large institutions expect to be on the list when it is announced, perhaps as soon as 8-Jun. But some officials point out the permission is only being granted with multiple layers of less visible government support in the form of cheap loans, debt guarantees, and a promise that big banks will not be allowed to fail. The government will no longer share the banks' profits, but will remain ready to absorb losses, leading some to question the systemic wisdom of the action.
WYNN (40.60): Wynn Resorts fair value reduced to $36 from $45 at Janney Montgomery Scott: Shares maintained neutral. Firm says high-end properties on the Vegas Strip may be impacted on new supply.
Cable operators attractive at current prices - WSJ: A "Heard on the Street" column notes that Comcast (CMCSA) and Time Warner Cable (TWC) are trading at less than five times projected 2009 EBITDA, vs seven times for media conglomerates, which "have been bid up too much." Cable operators have seen growth in the last two quarters, and while the long-term threat posed by market-share takers Verizon (VZ) and AT&T (T) is real, cable companies have room to grow in the short term. Internet video can be viewed as more of a threat to companies owning cable channels than to cable operators.
Fair Value: SP500 – 939.80; NDX: 1493.41; DOW: 8759.79
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
04:30: Euro-zone Sentix Investor Confidence (June): -31.0 (actual: -27)
10:15: MSFT presents at UBS Tech Conference
12:30: Fed’s Tarullo speaks on financial regulation
13:00: AAPL Worldwide Developers Conference Keynote
17:00: TXN Q2 2009 Guidance Call
Post-market EPS: PLL (.42/562.5M); ZQK (.06/502.4)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 9 points below fair value while the NASDAQ futures are trading 15 points below fair value at 7:45am ET. The US dollar is almost 1% higher against the Euro (1.385) after S&P downgraded Ireland’s sovereign credit rating for a second time this year; the dollar is also being underpinned by increased expectations that the Federal Reserve will raise interest rates later this year (Fed Fund futures are currently expecting a 30% chance that the Fed will raise rates 25 basis points by the September meeting. The odds in the beginning of last week were 15%). European markets are down 1.25% to 1.5% with financial and mining shares leading the decline. Irish markets are down 3% on the S&P downgrade. Early European Parliament election results showed that conservative center right and nationalist parties on the extreme right, held or gained support. In the UK Prime Minister Brown faces increased pressure as a disappointing showing in the European election compounded the poor results of the UK's local elections. Decliners on the FTSE 100 lead advancers 4-1. Barclays (BARC.LN) confirms it's held talks with a number of parties including Blackrock (BLK) about both iShares and BGI and says talks on going. Asian markets closed mixed (Japan up 1.0%, Hong Kong down 2.2%, Australia up 0.93%, Taiwan down 3.3%, India down 2.9%). A weaker yen, as well as better-than-expected US jobs figures, lifted automotive shares in Japan while shipping shares fell after a fall in the Baltic Dry Index. Toyota (7203.JP) gained on a report it plans ¥100B in production cuts by 2012.
Research Calls/Market Moving News:
Republic of Ireland downgraded to AA from AA+; outlook negative at Standard & Poor's
GOOG (444.32): Google downgraded to hold from buy at Benchmark Company LLC: Target is unchanged at $430. Firm cites checks, which indicate softening in online ad market. “Our channel checks reveal a softening in online advertising trends. There was a spurt of activity from March through mid-May. But visibility remains low and indicators for June through August are negative, implying at least a pause. Large advertisers appear to be reducing commitments heading into the summer. This pause could be due to advertisers awaiting the results of the TV upfront, exaggerated seasonal softness, or both. We are hearing that April and May were solid relative to expectations but indications for June through August are poor, thus tempering recent momentum.”
AAPL (144.67): Apple's Steve Jobs rumored for an early comeback to unveil the company's new iPhone - London Times: The article notes that technology blogs have speculated Jobs will appear for the software developers conference in San Francisco keynote speech scheduled for tomorrow (8-Jun) where the new version of the company's iPhone is expected to be unveiled. The article does not provide any details, but simply notes the widespread speculation of an appearance. Apple has reportedly said that Jobs in not expected back until the end of June.
GS (149.01); MS (30.97): Barron's Follow Up positive on Goldman (GS) and Morgan Stanley (MS): Barron's notes that shares of Wall Street's two surviving independent brokers are thriving and Goldman could be having its best quarter since 2007, with profits exceeding $5/share per Barclays' analyst Roger Freeman's new estimates.
BLK (163.74); BX (10.92): BlackRock added to Conviction Buy List; Blackstone (BX) upgraded at Goldman Sachs: the target on BLK is increased to $190 from $185. BX is upgraded to buy from neutral; target remains $13
BAC (11.86): Bank of America repayment of TARP expected in Q3, Q4, says Morgan Stanley: The firm expects the banks which will be allowed to repay first will be JPMorgan (JPM), processor banks, and possibly BB&T (BBT) and US Bancorp (USB). The rating on BAC remains overweight; target remains $32.
HDB (102.50): Citi may sell $1.71B stake in HDFC - Economic Times:
The bank continues to deny it will sell its 11.73% stake in India's largest mortgage company, and the article does not cite sources who say otherwise. But most people feel the bank's reason for its strategic stake is gone, and India is unlikely to allow Citi to own a substantial part of HDFC Bank. Nonetheless, some people say Citi will likely keep it’s holding because Asia is its only growth engine
US to allow some big banks to repay aid - Washington Post: JPMorgan Chase (JPM), Goldman Sachs (GS), American Express (AXP), and other large institutions expect to be on the list when it is announced, perhaps as soon as 8-Jun. But some officials point out the permission is only being granted with multiple layers of less visible government support in the form of cheap loans, debt guarantees, and a promise that big banks will not be allowed to fail. The government will no longer share the banks' profits, but will remain ready to absorb losses, leading some to question the systemic wisdom of the action.
WYNN (40.60): Wynn Resorts fair value reduced to $36 from $45 at Janney Montgomery Scott: Shares maintained neutral. Firm says high-end properties on the Vegas Strip may be impacted on new supply.
Cable operators attractive at current prices - WSJ: A "Heard on the Street" column notes that Comcast (CMCSA) and Time Warner Cable (TWC) are trading at less than five times projected 2009 EBITDA, vs seven times for media conglomerates, which "have been bid up too much." Cable operators have seen growth in the last two quarters, and while the long-term threat posed by market-share takers Verizon (VZ) and AT&T (T) is real, cable companies have room to grow in the short term. Internet video can be viewed as more of a threat to companies owning cable channels than to cable operators.
Thursday, June 4, 2009
June 4, 2009: Morning Call
June 4, 2009: Morning Call
Fair Value: SP500 – 931.23; NDX: 1475.68; DOW: 8671.22
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: CIEN (-.09/156.7M); MTN (1.55/342.7M)
07:00: Bank of England announces Interest Rate Decision: 0.50%
07:00: US Retailers release May Same Store Sales
07:45: ECB announces Interest Rate Decision: 1.00%
07:50: Fed’s Pianalto speaks on the economy
08:00: AMTD presents at Sandler O’Neill Conference
08:20: FLR presents at Credit Suisse Engineering and Construction Conference
08:25: Fed’s Dudley speaks on PPIP
08:30: Non-Farm Productivity (Q1): 1.2%; Unit Labor Costs: 2.9%
08:30: Initial Jobless Claims (w/e May 30): 620,000; Continuing Claims: 6.855 million
08:45: Fed Chairman Bernanke speaks at Fed Conference
09:00: JEC presents at Credit Suisse Engineering and Construction Conference
09:50: MDR presents at Credit Suisse Engineering and Construction Conference
10:15: MA presents at KBW Financial Conference
10:30: EIA Natural Gas Storage Change
11:15: GOOG presents at Bank of America Tech Conference
13:15: FWLT presents at Credit Suisse Engineering and Construction Conference
13:30: KLAC presents at Bank of America Tech conference
14:15: PCLN presents at Bank of America Tech Conference
14:30: ABX presents at Goldman Sachs Basic Materials Conference
Post-market EPS: COO (.49/265.7M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 2 points above fair value at 7:30am ET. The jobless claims data at 8:30 will be a key catalyst because bullish market participants have been expecting a drop into the mid-high 500,000-range; May retail comps will also be important. European markets are up 0.25-0.50% following Euro-zone retail sales that came in better than expected (-2.3% vs. –2.9% consensus). European markets were up as much as 1.3% before paring gains. Decliners on the FTSE 100 lead advancers 11-9. Wm Morrison (MRW.LN) trades higher after a trading update. Debenhams (DEB.LN) declined after announcing a placing and open offer to raise approx £323M. Air Berlin (AB1.GR) announced it's to issue 6M new shares and also released May passenger traffic. Rio Tinto (RIO.LN) retreated to session lows on reports it may scrap Chinalco stake sale at today’s board meeting. Sainsbury (SBRY.LN) upgraded to overweight at Morgan Stanley. ThyssenKrupp (TKA.GR) upgraded to buy at BoA Merrill. Asian markets closed lower (Japan down 0.75%, Hong Kong down 0.40%, Australia down 2.06%, South Korea down 2.4%, India up 0.94%). Reuters reported a North Korean patrol boat briefly entered South Korea waters, retreated after verbal warning. BHP billiton (BLT.LN) is reported to have contacted big Chinese steel mills hoping to agree index-linked iron ore prices, no deal as been agreed yet. Resource and basic material stocks lead the way down.
Research Calls/Market Moving News:
GOOG (431.65): Google target increased to $580 from $450 at Citi: The firm reiterates its buy rating, noting that its checks support its estimates for Q2 and sees EPS upside in 2010. GOOG is Citi's top large-cap Internet stock pick.
GS (142.15): Goldman Sachs upgraded to outperform from market perform at Bernstein: Target for the shares is $176. Bernstein raises f09 and f10 EPS estimates to $15.33 and $16.47 saying they believe we are in the midst of a sustainable fixed income recovery that extends beyond near term expectations and through f10.
Crude Oil (66.12): Goldman Sachs raises 3-month target for WTI oil to $75 from $52: The firm expects WTI prices to continue to rally through 2010, based on supply/demand, and raises its 12-month WTI target to $90 from $70/bbl. Goldman Sachs also initiates a year-end 2010 WTI price target of $95.
AAPL (140.95): Apple's target increased at Oppenheimer: The shares are rated outperform and the target is increased to $160 from $140. The firm expects software to be the focus of next week's WWDC. Oppenheimer says that while new iPhone models are likely to hit the market within 1-2 months, there are good reasons for AAAPL to delay the announcement a bit longer and the firm would use any weakness related to the lack of an iPhone announcement as a buying opportunity. Oppenheimer is also raising their estimates to reflect strengthening Mac sales; a favorable component-pricing environment; and higher F4Q software sales with the release of Snow Leopard.
AAPL (140.95): Piper Jaffray’s Gene Munster comments on the upcoming WWDC event: Given WWDC (Mon. 6/8) will likely be in line with expectations, we expect the event to be a slight negative for shares of AAPL (despite the possibility of new iPhone models announced at the event). This does not change our confidence in our 12-month $180 price target, or our belief that the new iPhone will be additive to Street numbers. • Regardless of whether or not new iPhones are announced at WWDC, we continue to expect a mid-July launch of a family of iPhones. • New iPhone models likely to include a low-cost ($99-$149) model with reduced capacity, and a higher-end models with video camera and more storage. • Reports of cheaper iPhone plans appear to be unfounded; we believe the chances of a low-cost data plan attached to the cheaper iPhone are about 25%. • Jobs appearance at WWDC unlikely, but end of June return appears to be likely. Will Pricing Of New iPhones Be Different? We believe Street expectations for the pricing of the low-cost model appear to be aggressive, with many investors expecting a $99 iPhone with reduced monthly fees for data. This likely comes as a result of media reports indicating that the CEO of AT&T Mobility acknowledged that AT&T has considered reduced monthly fees for limited data usage on the iPhone. We see this as a possibility, but we believe $149 is a more likely price point and we believe the chances of reduced monthly fees for a limited monthly data allotment from AT&T are about 25%. We do not think Apple is interested in capping the data limits to achieve a lower price point. Given our expectations, we are anticipating WWD to be a slight disappointment to investors, as demand for increased units is driven more by lower prices than by slight tweaks to the feature set. That said, our expectations for a disappointment at WWDC do not change our broader thesis of the iPhone's proven form factor along with steady price declines and new models to address additional markets and drive unit growth”
ADBE (29.06): Adobe Systems target raised to $34 from $26 at Morgan Stanley: The firm believes EPS for f09 appears stable and indicates better visibility should move f10 consensus toward their above the Street estimates.
COST (48.47): Costco reports May comps (7.0%) vs consensus (4.2%): May revenues were (5%) to $5.47B. US comps were (6%); international comps (7%). US comps (excluding the impact from gasoline deflation) were (1%); international (excluding the effects of foreign exchange) +7%.
VLO (18.40): Valero Energy 40M share secondary priced at $18 a share through Barclays and JPMorgan.
STLD (14.03): Steel Dynamics secondary offering priced at $13.50 through Merrill Lynch, Goldman Sachs, Morgan Stanley and JPMorgan.
Financials firms looking to delay accounting rule that would force them to bring off-balance-sheet vehicles back on their books – WSJ: The banks and other financial firms are concerned that the asset consolidation could force them to raise additional capital. According to the article, a group that includes the Chamber of Commerce, the Mortgage Bankers Association, and the American Council of Life Insurers and others recently a sent a letter to Treasury Secretary Geithner regarding the off-balance-sheet accounting-rule change, noting that it should be adopted "cautiously and seek to minimize any chilling effect on our frozen credit markets." The Journal notes that the rule would apply to existing off-balance-sheet entities, known as qualifying special purpose entities. Banks typically use these vehicles to package and sell loans they made.
CFTC head Gary Gensler to propose new derivatives rules on Thursday - NY Times: The Times reports that Gary Gensler, the new chairman of the Commodity Futures Trading Commission, will ask Congress on Thursday to impose new restrictions on financial firms that deal in derivatives. According to the article, lawmakers said that Gensler is expected to propose two sets of regulations - one set for the individual dealers of derivatives and another for the marketplaces where the instruments are traded. The two sets of rules are designed to eliminate the loopholes that some have argued would have weakened the plan announced three weeks ago by Treasury Secretary Geithner. Dealers would face requirements for capital reserves and collateral, imposing significant new expenses that could reduce their profitability. The proposal would also include antifraud and anti-manipulation provisions, as well as potential limits on market positions and holdings. The new measures would apply no matter whether a dealer issued standard derivatives or custom-written contracts tailored to meet the needs of specific companies.
Fair Value: SP500 – 931.23; NDX: 1475.68; DOW: 8671.22
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: CIEN (-.09/156.7M); MTN (1.55/342.7M)
07:00: Bank of England announces Interest Rate Decision: 0.50%
07:00: US Retailers release May Same Store Sales
07:45: ECB announces Interest Rate Decision: 1.00%
07:50: Fed’s Pianalto speaks on the economy
08:00: AMTD presents at Sandler O’Neill Conference
08:20: FLR presents at Credit Suisse Engineering and Construction Conference
08:25: Fed’s Dudley speaks on PPIP
08:30: Non-Farm Productivity (Q1): 1.2%; Unit Labor Costs: 2.9%
08:30: Initial Jobless Claims (w/e May 30): 620,000; Continuing Claims: 6.855 million
08:45: Fed Chairman Bernanke speaks at Fed Conference
09:00: JEC presents at Credit Suisse Engineering and Construction Conference
09:50: MDR presents at Credit Suisse Engineering and Construction Conference
10:15: MA presents at KBW Financial Conference
10:30: EIA Natural Gas Storage Change
11:15: GOOG presents at Bank of America Tech Conference
13:15: FWLT presents at Credit Suisse Engineering and Construction Conference
13:30: KLAC presents at Bank of America Tech conference
14:15: PCLN presents at Bank of America Tech Conference
14:30: ABX presents at Goldman Sachs Basic Materials Conference
Post-market EPS: COO (.49/265.7M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 2 points above fair value at 7:30am ET. The jobless claims data at 8:30 will be a key catalyst because bullish market participants have been expecting a drop into the mid-high 500,000-range; May retail comps will also be important. European markets are up 0.25-0.50% following Euro-zone retail sales that came in better than expected (-2.3% vs. –2.9% consensus). European markets were up as much as 1.3% before paring gains. Decliners on the FTSE 100 lead advancers 11-9. Wm Morrison (MRW.LN) trades higher after a trading update. Debenhams (DEB.LN) declined after announcing a placing and open offer to raise approx £323M. Air Berlin (AB1.GR) announced it's to issue 6M new shares and also released May passenger traffic. Rio Tinto (RIO.LN) retreated to session lows on reports it may scrap Chinalco stake sale at today’s board meeting. Sainsbury (SBRY.LN) upgraded to overweight at Morgan Stanley. ThyssenKrupp (TKA.GR) upgraded to buy at BoA Merrill. Asian markets closed lower (Japan down 0.75%, Hong Kong down 0.40%, Australia down 2.06%, South Korea down 2.4%, India up 0.94%). Reuters reported a North Korean patrol boat briefly entered South Korea waters, retreated after verbal warning. BHP billiton (BLT.LN) is reported to have contacted big Chinese steel mills hoping to agree index-linked iron ore prices, no deal as been agreed yet. Resource and basic material stocks lead the way down.
Research Calls/Market Moving News:
GOOG (431.65): Google target increased to $580 from $450 at Citi: The firm reiterates its buy rating, noting that its checks support its estimates for Q2 and sees EPS upside in 2010. GOOG is Citi's top large-cap Internet stock pick.
GS (142.15): Goldman Sachs upgraded to outperform from market perform at Bernstein: Target for the shares is $176. Bernstein raises f09 and f10 EPS estimates to $15.33 and $16.47 saying they believe we are in the midst of a sustainable fixed income recovery that extends beyond near term expectations and through f10.
Crude Oil (66.12): Goldman Sachs raises 3-month target for WTI oil to $75 from $52: The firm expects WTI prices to continue to rally through 2010, based on supply/demand, and raises its 12-month WTI target to $90 from $70/bbl. Goldman Sachs also initiates a year-end 2010 WTI price target of $95.
AAPL (140.95): Apple's target increased at Oppenheimer: The shares are rated outperform and the target is increased to $160 from $140. The firm expects software to be the focus of next week's WWDC. Oppenheimer says that while new iPhone models are likely to hit the market within 1-2 months, there are good reasons for AAAPL to delay the announcement a bit longer and the firm would use any weakness related to the lack of an iPhone announcement as a buying opportunity. Oppenheimer is also raising their estimates to reflect strengthening Mac sales; a favorable component-pricing environment; and higher F4Q software sales with the release of Snow Leopard.
AAPL (140.95): Piper Jaffray’s Gene Munster comments on the upcoming WWDC event: Given WWDC (Mon. 6/8) will likely be in line with expectations, we expect the event to be a slight negative for shares of AAPL (despite the possibility of new iPhone models announced at the event). This does not change our confidence in our 12-month $180 price target, or our belief that the new iPhone will be additive to Street numbers. • Regardless of whether or not new iPhones are announced at WWDC, we continue to expect a mid-July launch of a family of iPhones. • New iPhone models likely to include a low-cost ($99-$149) model with reduced capacity, and a higher-end models with video camera and more storage. • Reports of cheaper iPhone plans appear to be unfounded; we believe the chances of a low-cost data plan attached to the cheaper iPhone are about 25%. • Jobs appearance at WWDC unlikely, but end of June return appears to be likely. Will Pricing Of New iPhones Be Different? We believe Street expectations for the pricing of the low-cost model appear to be aggressive, with many investors expecting a $99 iPhone with reduced monthly fees for data. This likely comes as a result of media reports indicating that the CEO of AT&T Mobility acknowledged that AT&T has considered reduced monthly fees for limited data usage on the iPhone. We see this as a possibility, but we believe $149 is a more likely price point and we believe the chances of reduced monthly fees for a limited monthly data allotment from AT&T are about 25%. We do not think Apple is interested in capping the data limits to achieve a lower price point. Given our expectations, we are anticipating WWD to be a slight disappointment to investors, as demand for increased units is driven more by lower prices than by slight tweaks to the feature set. That said, our expectations for a disappointment at WWDC do not change our broader thesis of the iPhone's proven form factor along with steady price declines and new models to address additional markets and drive unit growth”
ADBE (29.06): Adobe Systems target raised to $34 from $26 at Morgan Stanley: The firm believes EPS for f09 appears stable and indicates better visibility should move f10 consensus toward their above the Street estimates.
COST (48.47): Costco reports May comps (7.0%) vs consensus (4.2%): May revenues were (5%) to $5.47B. US comps were (6%); international comps (7%). US comps (excluding the impact from gasoline deflation) were (1%); international (excluding the effects of foreign exchange) +7%.
VLO (18.40): Valero Energy 40M share secondary priced at $18 a share through Barclays and JPMorgan.
STLD (14.03): Steel Dynamics secondary offering priced at $13.50 through Merrill Lynch, Goldman Sachs, Morgan Stanley and JPMorgan.
Financials firms looking to delay accounting rule that would force them to bring off-balance-sheet vehicles back on their books – WSJ: The banks and other financial firms are concerned that the asset consolidation could force them to raise additional capital. According to the article, a group that includes the Chamber of Commerce, the Mortgage Bankers Association, and the American Council of Life Insurers and others recently a sent a letter to Treasury Secretary Geithner regarding the off-balance-sheet accounting-rule change, noting that it should be adopted "cautiously and seek to minimize any chilling effect on our frozen credit markets." The Journal notes that the rule would apply to existing off-balance-sheet entities, known as qualifying special purpose entities. Banks typically use these vehicles to package and sell loans they made.
CFTC head Gary Gensler to propose new derivatives rules on Thursday - NY Times: The Times reports that Gary Gensler, the new chairman of the Commodity Futures Trading Commission, will ask Congress on Thursday to impose new restrictions on financial firms that deal in derivatives. According to the article, lawmakers said that Gensler is expected to propose two sets of regulations - one set for the individual dealers of derivatives and another for the marketplaces where the instruments are traded. The two sets of rules are designed to eliminate the loopholes that some have argued would have weakened the plan announced three weeks ago by Treasury Secretary Geithner. Dealers would face requirements for capital reserves and collateral, imposing significant new expenses that could reduce their profitability. The proposal would also include antifraud and anti-manipulation provisions, as well as potential limits on market positions and holdings. The new measures would apply no matter whether a dealer issued standard derivatives or custom-written contracts tailored to meet the needs of specific companies.
Wednesday, June 3, 2009
June 3, 2009: Morning Call
June 3, 2009: Morning Call
Fair Value: SP500 – 944.06; NDX: 1480.56; DOW: 8730.00
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: JOYG (.89/873.5M); TOL (-.44/386.4M); WSM (-.21/609.0M)
04:00: Euro-zone PMI Services (May Final): 44.7 (actual: 44.8)
05:00: Euro-zone PPI (April):-0.9% MoM; -4.6%YoY(actual: -1.0% MoM; -4.6%MoM)
05:00: Euro-zone GDP (Q1): -2.5% QoQ; -4.6% YoY (actual: -2.5% QoQ; -4.8% YoY)
08:00: NSC Analyst Day
08:00: COF presents at KBW Financial Conference
08:00: BRCM presents at Bank of America Tech conference
08:15: ADP Employment Change (May): -525,000
09:00: MSFT presents at Bank of America Tech conference
10:00: ISM Non-Manufacturing (May): 45.0
10:00: Factory Orders (April): 0.9%
10:00: Fed Chairman Bernanke testifies on the economy before the House Budget Committee
10:30: DOE Crude Oil and Gasoline Inventories: -1.5M Crude Draw; 650k Gas Build
10:30: AMAT presents at Bank of America Tech Conference
11:00: HOV earnings call
11:00: JOYG earnings call
12:15: AXP presents at KBW Financial Conference
14:00: TOL earnings call
14:20: AGU presents at Goldman Sachs Basic Materials Conference
14:30: Fed’s Hoenig speaks on the economy
15:45: CF presents at Goldman Sachs Basic Materials Conference
17:00: Select Retailers release May Same Store Sales
Post-market EPS: DCP (.30/776.4M); SAI (.27/2.51B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 6 points below fair value at 8am ET. Weakness in European markets (down 1.0%-2.0%) is weighing on index futures, commodities, the Euro and British pound. Euro-zone GDP came in a little weaker than expected and markets in London are the weakest on concerns about political instability following reports of tension between Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling. European banks (down 3.5%) remain under pressure on concerns about an overhang on the sector due to all the equity issuance (BCS is down another 6% after falling 11% on Tuesday following the Abu Dhabi sales). Basic material and technology stocks are also weak. Asian markets closed higher (Japan up 0.38%, Hong Kong up 1.08%, Australia up 1.56%, Shanghai up 2.56%, India down 0.03%). GDP numbers. Basic Materials stocks continued to rally with Nippon Mining (5016.JP) and Zijin Mining Group (2899.HK) both gaining. Shippers were also higher again as the Baltic Dry Index reached an eight-month high. In Korea, financials were lower after a report in the Mail Business Newspaper that KB Financial (105560.KS) and Woori Finance Holdings (053000.KS) were working on rights offers. In Japan, automakers were mostly higher despite having posted steeper declines in U.S. sales in May than most of their American counterparts.
Research Calls/Market Moving News:
Pre-market Trading Summary: Trading higher: JOYG +5.3% (earnings), BUCY +4.8% (JOYG sympathy), AAPL +0.50% (outperforms big cap tech on an upgrade at Collins Stewart and positive comments and price target bump at BMO Capital), TIVO +35.8% (Favorable US District Court ruling against DISH networks), TSRA +13.7% (license agreement with MOT), APSG +11.7% (earnings), FE +6.5% (guidance), SGY +6.2% (deepwater discovery), AGEN +5.8% (follow-through from kidney cancer study), NFX +4.4% (deepwater discovery), BOBE +1.7% (earnings). Trading lower: VLO -10.2% (guidance), STLD -9.1% (27M share secondary; $150M convertible; dividend cut by 25%), AET -7% (guidance), DISH -6.9% (found contempt in TIVO case), BVF -6.6% ($200M convertible), BCSI -5.6% (earnings), WLP -4.2% (AET sympathy), JBLU -3.7% (20M share secondary; May traffic), HUM -3.6% (AET sympathy), HOV -3.6% (earnings), PAY -3.5% (earnings), CI -2.6%, SNDA -1.5% (earnings), FIF -1.1% (earnings).
Fed officials have surprised banks saying that specific amounts of new capital must be raised before repaying TARP – Bloomberg: Fed officials have told banks that they needed to raise specific amounts of new capital prior to repaying taxpayer funds, with more stringent assessments applied compared to the results of the stress tests in May. JPMorgan (JPM) and American Express (AXP) were told they needed to increase common equity, after having been told they had enough capital in case of a further economic downturn. Morgan Stanley (MS) was also told to raise more funds (note that all 3 companies announced capital raises this week). Goldman Sachs (GS) hasn't been required to seek any more funds since its $5.75B capital raise in Apr. The article notes the caution from the Fed stems from a concern of the Fed that the banks repay TARP funds and then claim they have no capital to make loans.
AAPL (139.49): Apple upgraded to buy from hold at Collins Stewart: The firm believes the AAPL OS with new product launches and lower prices is positioned to gain share at the expense of RIMM and Windows Mobile. Target for the shares is $170.
AAPL (139.49): Apple estimates and target raised at BMO Capital: The firm raises their f10 EPS estimate to $6.00 from $5.78 vs. Reuters $6.26 based on higher iPhone units and gross margins. Target raised to $150 from $135. Shares remain outperform rated
DDUP (31.58): NetAPP (NTAP) raises offer for Data Domain: NTAP now proposes to pay $16.45/share cash and $13.55/share in stock, based on NTAP's 2-Jun close of $19.34. The terms of the agreement, as with the existing agreement, include a 10% symmetrical collar, using a range of 0.6370-0.7783 shares of NTAP stock. NTAP says it believes its revised offer is superior to EMC's unsolicited $30/share cash proposal.
JOYG (35.60): Joy Global reports Q2 EPS $1.17 vs Reuters $0.89: Company reports revenues of $924.0M vs Reuters $872.1M. Guides Q3 EPS to $0.89 vs Reuters $0.87. Guides full year EPS to $3.80-4.00 vs Reuters $3.55; guides revenues to $3.5-3.6B vs Reuters $3.48B.
TOL (19.53): Toll Brothers reports Q2 EPS ($0.52): Net loss includes a pre-tax writedown of $119.6M or $0.48. Company reports revenues of $398.3M vs Reuters $399.3M. Backlog, net signed contracts, and cash levels at end Q2 were reported on 20-May. Given the uncertainties, CEO says company will not provide earnings guidance. Nevertheless, based on FY 2009's deliveries to-date, Q2 end backlog and the pace of activity at its communities, Toll Brothers currently estimates that it will deliver between 2,200 and 2,800 homes in FY 2009 vs previous estimate to deliver between 2K-3K homes in f09. Company now projects an average delivered price for these homes of between $590k and $620k per home vs previous guidance of between $600-$625K per home. Still expects lower f09 projected revenues.
Financial firms spent $27.6M in Q1 lobbying Washington about the need for changes in mark-to-market accounting and other issues – WSJ: The Journal cites its own analysis of public filings. The paper adds that these 31 firms and trade groups that formed a coalition to lobby on the changes, also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change.
Banks that were subjected to government stress tests have raised $85B or more since 7-May – WSJ: At least $65B has come sales of common stock, while roughly another $20B has come from nonguaranteed debt sales and the conversion of preferred shares. The paper adds that the robust investor appetite for bank shares has surprised many industry executives. According to the article, mutual funds and institutional investors have been aggressive buyers in the recent offerings, as underexposure to the group amid the recent recovery in the markets has weighed on their performance. The Journal goes on to highlight concerns about the quality of the recovery in the banking sector, as well as the lack of insider buying.
MOS (55.97): Mosaic estimates lowered at UBS: Q4 EPS estimates are materially lowered to reflect unfavorable currency translation and reduced expectations for Phosphate and Offshore segments. FY'10 EPS estimates are lowered to reflect weaker shipment and margin assumptions for Phosphate. Rating is buy. Target remains $63
RW Baird initiates BJ, COST, HD, others: Home Depot (HD) initiated outperform with $28 target. Lowe's (LOW) initiated outperform with $24 target. Target (TGT) initiated outperform with $50 target. Tractor Supply (TSCO) initiated outperform with $48 target. Wal-Mart (WMT) initiated outperform with $60 target. BJ's Wholesale (BJ) initiated neutral with $40 target. Costco (COST) initiated neutral with $53 target. PetSmart (PETM) initiated neutral with $22 target.
Fair Value: SP500 – 944.06; NDX: 1480.56; DOW: 8730.00
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: JOYG (.89/873.5M); TOL (-.44/386.4M); WSM (-.21/609.0M)
04:00: Euro-zone PMI Services (May Final): 44.7 (actual: 44.8)
05:00: Euro-zone PPI (April):-0.9% MoM; -4.6%YoY(actual: -1.0% MoM; -4.6%MoM)
05:00: Euro-zone GDP (Q1): -2.5% QoQ; -4.6% YoY (actual: -2.5% QoQ; -4.8% YoY)
08:00: NSC Analyst Day
08:00: COF presents at KBW Financial Conference
08:00: BRCM presents at Bank of America Tech conference
08:15: ADP Employment Change (May): -525,000
09:00: MSFT presents at Bank of America Tech conference
10:00: ISM Non-Manufacturing (May): 45.0
10:00: Factory Orders (April): 0.9%
10:00: Fed Chairman Bernanke testifies on the economy before the House Budget Committee
10:30: DOE Crude Oil and Gasoline Inventories: -1.5M Crude Draw; 650k Gas Build
10:30: AMAT presents at Bank of America Tech Conference
11:00: HOV earnings call
11:00: JOYG earnings call
12:15: AXP presents at KBW Financial Conference
14:00: TOL earnings call
14:20: AGU presents at Goldman Sachs Basic Materials Conference
14:30: Fed’s Hoenig speaks on the economy
15:45: CF presents at Goldman Sachs Basic Materials Conference
17:00: Select Retailers release May Same Store Sales
Post-market EPS: DCP (.30/776.4M); SAI (.27/2.51B)
Foreign Market Summary/Key Macro News/Commentary:
The S&P and NASDAQ futures are trading 6 points below fair value at 8am ET. Weakness in European markets (down 1.0%-2.0%) is weighing on index futures, commodities, the Euro and British pound. Euro-zone GDP came in a little weaker than expected and markets in London are the weakest on concerns about political instability following reports of tension between Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling. European banks (down 3.5%) remain under pressure on concerns about an overhang on the sector due to all the equity issuance (BCS is down another 6% after falling 11% on Tuesday following the Abu Dhabi sales). Basic material and technology stocks are also weak. Asian markets closed higher (Japan up 0.38%, Hong Kong up 1.08%, Australia up 1.56%, Shanghai up 2.56%, India down 0.03%). GDP numbers. Basic Materials stocks continued to rally with Nippon Mining (5016.JP) and Zijin Mining Group (2899.HK) both gaining. Shippers were also higher again as the Baltic Dry Index reached an eight-month high. In Korea, financials were lower after a report in the Mail Business Newspaper that KB Financial (105560.KS) and Woori Finance Holdings (053000.KS) were working on rights offers. In Japan, automakers were mostly higher despite having posted steeper declines in U.S. sales in May than most of their American counterparts.
Research Calls/Market Moving News:
Pre-market Trading Summary: Trading higher: JOYG +5.3% (earnings), BUCY +4.8% (JOYG sympathy), AAPL +0.50% (outperforms big cap tech on an upgrade at Collins Stewart and positive comments and price target bump at BMO Capital), TIVO +35.8% (Favorable US District Court ruling against DISH networks), TSRA +13.7% (license agreement with MOT), APSG +11.7% (earnings), FE +6.5% (guidance), SGY +6.2% (deepwater discovery), AGEN +5.8% (follow-through from kidney cancer study), NFX +4.4% (deepwater discovery), BOBE +1.7% (earnings). Trading lower: VLO -10.2% (guidance), STLD -9.1% (27M share secondary; $150M convertible; dividend cut by 25%), AET -7% (guidance), DISH -6.9% (found contempt in TIVO case), BVF -6.6% ($200M convertible), BCSI -5.6% (earnings), WLP -4.2% (AET sympathy), JBLU -3.7% (20M share secondary; May traffic), HUM -3.6% (AET sympathy), HOV -3.6% (earnings), PAY -3.5% (earnings), CI -2.6%, SNDA -1.5% (earnings), FIF -1.1% (earnings).
Fed officials have surprised banks saying that specific amounts of new capital must be raised before repaying TARP – Bloomberg: Fed officials have told banks that they needed to raise specific amounts of new capital prior to repaying taxpayer funds, with more stringent assessments applied compared to the results of the stress tests in May. JPMorgan (JPM) and American Express (AXP) were told they needed to increase common equity, after having been told they had enough capital in case of a further economic downturn. Morgan Stanley (MS) was also told to raise more funds (note that all 3 companies announced capital raises this week). Goldman Sachs (GS) hasn't been required to seek any more funds since its $5.75B capital raise in Apr. The article notes the caution from the Fed stems from a concern of the Fed that the banks repay TARP funds and then claim they have no capital to make loans.
AAPL (139.49): Apple upgraded to buy from hold at Collins Stewart: The firm believes the AAPL OS with new product launches and lower prices is positioned to gain share at the expense of RIMM and Windows Mobile. Target for the shares is $170.
AAPL (139.49): Apple estimates and target raised at BMO Capital: The firm raises their f10 EPS estimate to $6.00 from $5.78 vs. Reuters $6.26 based on higher iPhone units and gross margins. Target raised to $150 from $135. Shares remain outperform rated
DDUP (31.58): NetAPP (NTAP) raises offer for Data Domain: NTAP now proposes to pay $16.45/share cash and $13.55/share in stock, based on NTAP's 2-Jun close of $19.34. The terms of the agreement, as with the existing agreement, include a 10% symmetrical collar, using a range of 0.6370-0.7783 shares of NTAP stock. NTAP says it believes its revised offer is superior to EMC's unsolicited $30/share cash proposal.
JOYG (35.60): Joy Global reports Q2 EPS $1.17 vs Reuters $0.89: Company reports revenues of $924.0M vs Reuters $872.1M. Guides Q3 EPS to $0.89 vs Reuters $0.87. Guides full year EPS to $3.80-4.00 vs Reuters $3.55; guides revenues to $3.5-3.6B vs Reuters $3.48B.
TOL (19.53): Toll Brothers reports Q2 EPS ($0.52): Net loss includes a pre-tax writedown of $119.6M or $0.48. Company reports revenues of $398.3M vs Reuters $399.3M. Backlog, net signed contracts, and cash levels at end Q2 were reported on 20-May. Given the uncertainties, CEO says company will not provide earnings guidance. Nevertheless, based on FY 2009's deliveries to-date, Q2 end backlog and the pace of activity at its communities, Toll Brothers currently estimates that it will deliver between 2,200 and 2,800 homes in FY 2009 vs previous estimate to deliver between 2K-3K homes in f09. Company now projects an average delivered price for these homes of between $590k and $620k per home vs previous guidance of between $600-$625K per home. Still expects lower f09 projected revenues.
Financial firms spent $27.6M in Q1 lobbying Washington about the need for changes in mark-to-market accounting and other issues – WSJ: The Journal cites its own analysis of public filings. The paper adds that these 31 firms and trade groups that formed a coalition to lobby on the changes, also directed campaign contributions totaling $286,000 to legislators on a key committee, many of whom pushed for the rule change.
Banks that were subjected to government stress tests have raised $85B or more since 7-May – WSJ: At least $65B has come sales of common stock, while roughly another $20B has come from nonguaranteed debt sales and the conversion of preferred shares. The paper adds that the robust investor appetite for bank shares has surprised many industry executives. According to the article, mutual funds and institutional investors have been aggressive buyers in the recent offerings, as underexposure to the group amid the recent recovery in the markets has weighed on their performance. The Journal goes on to highlight concerns about the quality of the recovery in the banking sector, as well as the lack of insider buying.
MOS (55.97): Mosaic estimates lowered at UBS: Q4 EPS estimates are materially lowered to reflect unfavorable currency translation and reduced expectations for Phosphate and Offshore segments. FY'10 EPS estimates are lowered to reflect weaker shipment and margin assumptions for Phosphate. Rating is buy. Target remains $63
RW Baird initiates BJ, COST, HD, others: Home Depot (HD) initiated outperform with $28 target. Lowe's (LOW) initiated outperform with $24 target. Target (TGT) initiated outperform with $50 target. Tractor Supply (TSCO) initiated outperform with $48 target. Wal-Mart (WMT) initiated outperform with $60 target. BJ's Wholesale (BJ) initiated neutral with $40 target. Costco (COST) initiated neutral with $53 target. PetSmart (PETM) initiated neutral with $22 target.
Tuesday, June 2, 2009
June 2, 2009: Morning Call
June 2, 2009: Morning Call
Fair Value: SP500 – 942.06; NDX: 1477.36; DOW: 8710.99
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: DAKT (.10/126.2M); LAYN (.16/219.2M)
05:00: Euro-zone Unemployment Rate (April): 9.1% (actual at 9.2%).
10:00: Pending Home Sales (April): 0.3% MoM
10:00: RCII presents at Stephen’s Investment Conference
10:50: APC presents at RBC Global Energy Conference
11:00: AAN presents at Stephen’s Investment Conference
13:20: Fed’s Fisher speaks on the economy
14:00: GM May Vehicle Sales Conference Call
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
Post-market EPS: HOV (-1.81/334.9M); BOBE (.38/430.8M); SNDA (.73/155.2M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 2 points below fair value while the NASDAQ futures are trading 3 points below fair value. Markets are digesting news of additional equity issuance by a wide range of companies. Commodities are modestly lower in early trade, bonds are modestly higher, and the dollar has weakened 0.50% against the Euro in the last hour to 1.4225. Asian markets initially traded higher but markets reversed most of the opening gains (Japan up 0.27%, Hong Kong down 2.64%, Australia up 1.56%, India up 0.25%, South Korea down 0.21%). European markets are trading modestly lower (down 0.20%) but have been in a narrow range on either side of unchanged all morning. Decliners on the FTSE 100 lead advancers 3-2. Barclays (BARC.LN) fell after confirms plans by Abu Dhabi investors to sell 1.3B shares. Ryanair Holdings (RYA.ID) trades lower after reporting full year results, which include disappointing FY10 guidance. Volkswagen (VOW.GR) gained following comments by Porsche (PAH3.GR) yesterday that it desires to integrate with Volkswagen. Economic data came in mixed with Euro-zone unemployment weaker (9.2% vs. 9.1% consensus) while UK May Construction PMI came in at 45.9 vs. consensus at 39.5.
Research Calls/Market Moving News:
JPM (36.11): JPMorgan Chase to raise $5B in common equity to satisfy supervisory condition for TARP repayment: JPM intends to raise $5B in common equity to satisfy a supervisory condition that the largest bank holding companies redeeming TARP (Troubled Asset Relief Program) preferred capital demonstrate access to the equity capital markets. While approval has not been granted, the company believes that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to do so before the end of June.
MS (29.89): Morgan Stanley plans $2.2B secondary offering: MS plans the offering to satisfy a supervisory condition to enable it to redeem TARP. MS says approval has not been granted, but that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to redeem it before the end of June. The offering is expected to include China Investment Corporation and Mitsubishi UFJ Financial Group, Inc (MTU). Recall that MS raised 4 billion dollars in common equity on May 8 at 24 per share.
EMC (12.42); DDUP (26.35): EMC offers to purchase Data Domain for $30/shr, competing against NTAP bid; to host conf call: EMC has proposed to acquire all of the outstanding common stock of Data Domain for $30.00 per share in cash, in a transaction with a total enterprise value of approximately $1.8B, net of Data Domain's cash. EMC's all-cash offer represents a 20% premium to the cash and stock offer made by NetApp for Data Domain on May 20, 2009.
DDUP (26.35): RBC comments on EMC's offer for Data Domain: The firm says EMC's plan to commence a tender offer could allow the company to close the deal sooner than NTAP's timeline of 90-120 days. DDUP's support of NTAP's offer could complicate an acquisition by EMC. The $57M NTAP termination fee is seen as miniscule in regard to EMC's offering price. RBC notes that though NTAP currently has room for an all cash counter offer, it would weaken the company's balance sheet resulting in net debt on its books.
BCS (20.50): Barclays confirms plans by Abu Dhabi investors to sell 1.3B shares – Bloomberg: Bloomberg cites an emailed statement from Barclays.
Other Capital raises to note: AXP –3.0% (500 million secondary), DCT -5.9% (22.5M share secondary), BKD -5.5% ($150M secondary), IRET -5.5% (3M share secondary), ICON -4.8% (10M share secondary), IMAX -3.1% (secondary)
QSFT (13.24): Quest Software (QSFT) announces Dutch Auction to repurchase up to 10.715M shares, or 11.3% of its common shares outstanding
DV (44.37): DV to replace GM in the S&P 500.
Fed says banks must tap the equity market prior to repaying TARP funds : Redemption approvals for an initial set of the 19 bank holding companies that partcipated in the Supervisory Capital Assessment Program (SCAP) are expected to be announced during the week of 8-Jun and applications will be evaluated periodically thereafter. Any bank holding company seeking to redeem U.S. Treasury capital must demonstrate an ability to access the long-term debt markets without reliance on the FDIC's Temporary Liquidity Guarantee Program (TLGP), and must successfully demonstrate access to public equity markets
Fair Value: SP500 – 942.06; NDX: 1477.36; DOW: 8710.99
Technical Levels:
SPX: 765, 788, 832, 875-880 support/ 935-943 resistance
Events:
Pre-market EPS: DAKT (.10/126.2M); LAYN (.16/219.2M)
05:00: Euro-zone Unemployment Rate (April): 9.1% (actual at 9.2%).
10:00: Pending Home Sales (April): 0.3% MoM
10:00: RCII presents at Stephen’s Investment Conference
10:50: APC presents at RBC Global Energy Conference
11:00: AAN presents at Stephen’s Investment Conference
13:20: Fed’s Fisher speaks on the economy
14:00: GM May Vehicle Sales Conference Call
16:30: API Crude Oil and Gasoline Inventories
17:00: ABC Consumer Confidence
Post-market EPS: HOV (-1.81/334.9M); BOBE (.38/430.8M); SNDA (.73/155.2M)
Foreign Market Summary/Key Macro News/Commentary:
The S&P futures are trading 2 points below fair value while the NASDAQ futures are trading 3 points below fair value. Markets are digesting news of additional equity issuance by a wide range of companies. Commodities are modestly lower in early trade, bonds are modestly higher, and the dollar has weakened 0.50% against the Euro in the last hour to 1.4225. Asian markets initially traded higher but markets reversed most of the opening gains (Japan up 0.27%, Hong Kong down 2.64%, Australia up 1.56%, India up 0.25%, South Korea down 0.21%). European markets are trading modestly lower (down 0.20%) but have been in a narrow range on either side of unchanged all morning. Decliners on the FTSE 100 lead advancers 3-2. Barclays (BARC.LN) fell after confirms plans by Abu Dhabi investors to sell 1.3B shares. Ryanair Holdings (RYA.ID) trades lower after reporting full year results, which include disappointing FY10 guidance. Volkswagen (VOW.GR) gained following comments by Porsche (PAH3.GR) yesterday that it desires to integrate with Volkswagen. Economic data came in mixed with Euro-zone unemployment weaker (9.2% vs. 9.1% consensus) while UK May Construction PMI came in at 45.9 vs. consensus at 39.5.
Research Calls/Market Moving News:
JPM (36.11): JPMorgan Chase to raise $5B in common equity to satisfy supervisory condition for TARP repayment: JPM intends to raise $5B in common equity to satisfy a supervisory condition that the largest bank holding companies redeeming TARP (Troubled Asset Relief Program) preferred capital demonstrate access to the equity capital markets. While approval has not been granted, the company believes that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to do so before the end of June.
MS (29.89): Morgan Stanley plans $2.2B secondary offering: MS plans the offering to satisfy a supervisory condition to enable it to redeem TARP. MS says approval has not been granted, but that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to redeem it before the end of June. The offering is expected to include China Investment Corporation and Mitsubishi UFJ Financial Group, Inc (MTU). Recall that MS raised 4 billion dollars in common equity on May 8 at 24 per share.
EMC (12.42); DDUP (26.35): EMC offers to purchase Data Domain for $30/shr, competing against NTAP bid; to host conf call: EMC has proposed to acquire all of the outstanding common stock of Data Domain for $30.00 per share in cash, in a transaction with a total enterprise value of approximately $1.8B, net of Data Domain's cash. EMC's all-cash offer represents a 20% premium to the cash and stock offer made by NetApp for Data Domain on May 20, 2009.
DDUP (26.35): RBC comments on EMC's offer for Data Domain: The firm says EMC's plan to commence a tender offer could allow the company to close the deal sooner than NTAP's timeline of 90-120 days. DDUP's support of NTAP's offer could complicate an acquisition by EMC. The $57M NTAP termination fee is seen as miniscule in regard to EMC's offering price. RBC notes that though NTAP currently has room for an all cash counter offer, it would weaken the company's balance sheet resulting in net debt on its books.
BCS (20.50): Barclays confirms plans by Abu Dhabi investors to sell 1.3B shares – Bloomberg: Bloomberg cites an emailed statement from Barclays.
Other Capital raises to note: AXP –3.0% (500 million secondary), DCT -5.9% (22.5M share secondary), BKD -5.5% ($150M secondary), IRET -5.5% (3M share secondary), ICON -4.8% (10M share secondary), IMAX -3.1% (secondary)
QSFT (13.24): Quest Software (QSFT) announces Dutch Auction to repurchase up to 10.715M shares, or 11.3% of its common shares outstanding
DV (44.37): DV to replace GM in the S&P 500.
Fed says banks must tap the equity market prior to repaying TARP funds : Redemption approvals for an initial set of the 19 bank holding companies that partcipated in the Supervisory Capital Assessment Program (SCAP) are expected to be announced during the week of 8-Jun and applications will be evaluated periodically thereafter. Any bank holding company seeking to redeem U.S. Treasury capital must demonstrate an ability to access the long-term debt markets without reliance on the FDIC's Temporary Liquidity Guarantee Program (TLGP), and must successfully demonstrate access to public equity markets
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