Wall Street Brief: Moody’s Reviews Top Banks, Google-Motorola Deal Under Review
Moody’s (NYSE:MCO) has warned it may cut the credit ratings of 17 global banks and 114 European financial institutions in response to the spread of the euro zone’s debt crisis. In a statement by the agency, it said of the cuts, “Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions.” U.S. banks currently being reviewed include Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Royal Bank of Canada (NYSE:RY).
Greece believes it has met European Union and IMF demands for a rescue plan to avoid a March default and hopes it will be approved on Monday. Euro zone officials have said not so fast and are reviewing options to either delay some or all of the plan until after elections. Meanwhile, the Troika may stage a permanent presence in Greece and create an escrow account for funds, ensuring payment of Greece’s debt.
China’s Anti-Monopoly Bureau is conducting a routine review for Google’s (NASDAQ:GOOG) $12.5 billion acquisition of Motorola (NYSE:MMI). China is expected to approve the transaction but it has a March 20 deadline for either a decision or to add an additional phase of the process. Under Chinese law, according to Reuters, enterprises running businesses in China that earn global annual revenues of 10 billion yuan ($1.55 billion) and 400 million yuan in China have to gain government approval for proposed acquisitions.
On Wednesday, CBS (NYSE:CBS) reported its fourth quarter earnings and saw higher fees from pay-TV systems and affiliate stations. This helped increase its net profit by 31 percent to $370 million but revenues dropped 3 percent to $3.78 billion, missing analyst estimates. CBS’s sales numbers dropped from advertising income declines but CBS CEO Leslie Moonves gave a positive forecast and said the network is talking with Netflix (NASDAQ:NFLX) to produce a show for them.
10 Buzzing Stocks: Amazon Falls 3% After Downgrade, While Apache Edges Higher
Shares of J.M. Smucker Co. (NYSE:SJM) fell 6.9 percent in morning trading. The company announced its third-quarter profit declined 11 percent to $116.8 million ($1.03 per share), compared to $132 million ($1.11 per share) a year earlier. Shares of Kraft Foods Inc. (NYSE:KFT) edged slightly higher, as ConAgra Foods Inc. (NYSE:CAG) headed lower.
Amazon.Com Inc. (NASDAQ:AMZN) shares decreased 3.2 percent in early trading as Morgan Stanley (NYSE:MS) downgraded the internet retailer from Overweight to Equal Weight. Speculation also builds over rumors that Amazon China pulled Apple’s (NASDAQ:AAPL) iPad from its website.
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Apache Corp. (NYSE:APA) shares edged higher this morning after reporting fourth-quarter results. Net income for the company increased to $1.17 billion ($2.98 per share), compared to $670 million ($1.77 per share) a year earlier.
Shares of VF Corp. (NYSE:VFC) declined, despite reporting an increase in earnings. Net income for the fourth quarter increased to $257.3 million ($2.28 per share), compared to $54.2 million (49 cents per share) a year earlier. The company’s 2012 earnings forecast came in at $9.30 per share, below estimates of $9.53 per share.
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Waste Management Inc. (NYSE:WM) shares declined more than 2 percent this morning. The company reported a decrease in fourth-quarter net income. Earnings came in at $266 million (58 cents per share), compared to $281 million (59 cents per share) a year earlier. Shares of Republic Services Inc. (NYSE:RSG) also declined on the news.
Active Stocks: Discovery, Itron, Cabela’s, Equinix, NetApp Feb. 16th
Discovery Communications Inc. (NASDAQ:DISCA): Rose 10.5% to $1.12 billion from the year earlier quarter. Net income for Discovery Communications Inc. rose to $336 million (86 cents per share) vs. $194 million (45 cents per share) in the same quarter a year earlier. This marks a rise of 75.9% from the year earlier quarter. Shares of Discovery Communications Inc. are trading 1.62% lower today.
Itron, Inc. (NASDAQ:ITRI): Itron announced that the City of Madison, WI Water Utility will implement Itron’s advanced metering infrastructure for Project H2O, the City’s program to automate the collection and analysis of water meter reads. The solution will allow Madison to effectively manage conservation initiatives, improve metering accuracy and operate more efficiently. Installation using services from Wisconsin-based Corix Utilities and Madison Laborers Union Local 464 is expected to be complete by early 2013. Shares of Itron, Inc. are trading 19.92% higher today.
Cabela’s Incorporated (NYSE:CAB): Cabela’s Incorporated announced plans to open three next-generation stores and relocate its Winnipeg, Canada, store in 2013. Construction is scheduled to begin on next-generation stores in Columbus, Ohio; Grandville, Mich.; and Louisville, Ky., in the summer of 2012 and Cabela’s expects to open each location in spring 2013. Shares of Cabela’s Incorporated are trading 5.42% higher today.
Equinix Inc (NASDAQ:EQIX): After Equinix reported better than expected Q4 results, Stifel Nicolaus believes the company’s outlook is favorable and the firm thinks the company is beginning to be able to return excess cash to shareholders. The firm maintains a Buy rating on the stock. Shares of Equinix Inc are trading 4.07% higher today.
NetApp Inc. (NASDAQ:NTAP): Deutsche Bank raised its estimates and price target for NetApp citing improved earnings visibility post the company’s Q3 results. The firm continues to view shares as attractive and keeps a Buy rating on the stock. Shares of NetApp Inc. are trading 5.77% higher today.
Stocks Warming Up: General Motors, Blue Nile, J.M. Smucker, V.F. Corp
General Motors Company (NYSE:GM): GM’s U.S. defined benefit pension plans earned asset returns of 11.1 percent in 2011. They ended the year 88 percent funded, largely unchanged from 89 percent funded a year ago. The company also announced today that it is taking further steps toward its goals of de-risking and fully funding its U.S. pension plans. Effective Sept. 30, 2012, GM will freeze its defined benefit pension plan for U.S. salaried employees, who instead will receive contributions to a defined contribution plan, or 401. This initiative will affect GM’s U.S. salaried employees hired prior to Jan. 1, 2001. Salaried employees hired after that date are already covered by a defined contribution plans. Shares of General Motors Company are trading 4.09% higher today.
Blue Nile, Inc. (NASDAQ:NILE): “The fourth quarter was challenging for Blue Nile, with weakness in demand from our high end diamond customers and some of our international markets, as well as the continued impact of inflationary pressure on commodity costs. While we managed the business through these headwinds, we implemented components of a new strategy designed to accelerate growth. This plan centers around the acquisition of non-engagement customers, which we believe in the long term will feed growth in our engagement and non-engagement businesses. This strategy drove positive momentum, resulting in our strongest period of customer acquisition since 2007, with new customer growth of 15%. Additionally, in the fourth quarter we achieved order growth of 22% and unit growth of 30% compared to the fourth quarter of 2010. Growth in all three of these metrics accelerated in December and we believe these trends are important indicators of the long term growth potential of our business,” said Vijay Talwar, CEO. Shares of Blue Nile, Inc. are trading 12.02% lower today.
The J.M. Smucker Company (NYSE:SJM): Food manufacturer J.M. Smucker (NYSE:SJM) reported Q3 adjusted EPS of $1.22, versus analysts’ consensus estimate of $1.41. The company’s revenue also came in lower than expected. “Although we expected volume to decline during the quarter, the magnitude of the decline was unexpected..and sell-through was disappointing,” explained Smucker CEO Richard Smucker. “Consumer take-away declined sharply in a number of our categories during the fall bake and holiday season,” said Smucker, adding that he expects over $500M of cost increases for the company’s full fiscal year. Smucker has been covering these cost increases primarily with price hikes, the CEO added. The price increases have reduced sales volumes, the company said. On a positive note, Smucker said that the results don’t reflect fundamental changes that will affect the company’s business model. “We want to emphasize that we are confident in our long-term strategy and expect the consumer to adapt to adjusted market prices over the coming quarters,” added Smucker. Shares of The J.M. Smucker Company are trading 8.2% lower today.
V.F. Corporation (NYSE:VFC): Says headwinds include foreign currency translation ad higher pension expense. Says “well on our way” toward achieving goal of 40% of revenues from international markets by 2015. Shares of V.F. Corporation are trading 2% higher today.
Advance America, Cash Advance Centers (NYSE:AEA): Advance America, Cash Advance Centers, and Grupo Elektra, S.A.B. de C.V. announced that Advance America and subsidiaries of Grupo Elektra have entered into a definitive agreement under which Grupo Elektra will acquire control of all of the outstanding shares of Advance America, a leading U.S. short-term lender, for $10.50 per share in cash, representing a 32.7% premium to the company’s closing price of $7.91 on Feb. 15 . The total transaction value is approximately $780M, including the Company’s outstanding debt as of Dec. 31, 2011. The acquisition of Advance America represents Grupo Elektra’s first major investment in the U.S. financial services market. Advance America’s Board of Directors unanimously approved the transaction and recommends that its stockholders vote in favor of the transaction. Under the terms of the merger agreement, Advance America may solicit acquisition proposals from third parties for a period of 45 days and subject to the terms of the agreement, may, at any time, respond to an unsolicited proposal that its Board of Directors determines would be reasonably likely to result in a superior proposal. The Board of Directors of Advance America, with the assistance of its advisors, will actively solicit acquisition proposals during this 45-day period. There can be no assurance that this process will result in a superior proposal. If there is not a superior proposal, the transaction is expected to close during 1H of 2012. Shares of Advance America, Cash Advance Centers are trading 32.87% higher today.
Market Recap: Jobs, Housing Data Carry Stocks Higher
Markets closed up on Wall Street today: Dow +0.96%, S&P +1.10%, Nasdaq +1.51%, Oil +0.49%, Gold +0.10%.
On the commodities front, Oil (NYSE:USO) rose to $102.30 a barrel. Precious metals were also up, with Gold (NYSE:GLD) rising to $1,729.80 an ounce while Silver (NYSE:SLV) rose 0.26% to settle at $33.50.
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Today’s markets were up because:
1) Jobs. The U.S. Department of Labor reported today that initial claims for unemployment benefits unexpectedly fell last week to the lowest level in nearly four years, marking the the most substantial evidence of an improving labor market since the national unemployment rate reportedly dropped to 8.3 percent in January.
2) Housing. An unusually mild January helped builders beat forecasts for housing starts, which were up 1.5 percent from December to an annual rate of 699,000, the Commerce Department reported today. Meanwhile, applications for building permits, the best indicator of housing starts in the next two or three months, increased to a 676,000 annual rate.
3) Moody’s. Investors are paying little heed to ratings agencies these days, as financial stocks led today’s rally despite Moody’s putting Credit Suisse (NYSE:CS), UBS (NYSE:UBS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Deutsche Bank (NYSE:DB) on watch for possible downgrades, to name a few. All of the stocks were trading between 1 percent and 4 percent higher today, largely outperforming the major U.S. indexes.
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