Wall Street Watch: Zynga Earnings, Apple’s Cash
After cancelling Wednesday’s euro zone finance ministers meeting to discuss Greece’s EUR 130 billion ($170 billion) deal, Greek conservative leader Antonis Samaras has now said a letter of commitment will be sent for the EU/IMF bailout deal within the next day, according to MarketWatch. Fingers have been pointed at Samaras for not creating written pledges and suggesting doubt on the country’s promised austerity measures. He is seen as the country’s likely next Prime Minister when elections are held in April.
Over in Italy, the country entered into a recession in the fourth quarter as its GDP fell 0.7 percent on top of its third quarter 0.2 percent decline. For the euro zone, it fell 0.3 percent in the fourth quarter, representing its first contraction since the second quarter of 2009. Germany also saw its economy shrink in the quarter while France provided a bright spot with 0.2 percent growth.
On Tuesday at a technology conference, Apple Inc.’s (NASDAQ:AAPL) Chief Executive Officer Tim Cook said the company is discussing with its board on what to do with its growing mound of cash and securities, giving hope that it will declare a dividend. He noted that with the iPad tablet success, he sees the tablet eventually moving past the personal computer market in unit sales.
Zynga (NASDAQ:ZNGA) reported its fourth quarter earnings after hours on Tuesday, the first report since its public offering in December. The quarter beat estimates with an adjusted earnings per share of $0.05 and a $37 million profit while revenues rose 59 percent to $311.2 million. The company did see a $435 million net loss from a $510 million expense from stock-based compensation, according to The New York Times. The company notes its user base and those users paying for virtual goods rose but R&D costs also jumped nine-times on Zynga’s expanded game developments.
12 Super Hot Stocks: Kellogg Buys Pringles, Dell Downgraded and Zynga Drops 10%
Shares of Kellogg Co. (NYSE:K) jumped 3.3 percent in morning trading. Due to accounting investigations at Diamond Foods Inc. (NASDAQ:DMND), Procter & Gamble (NYSE:PG) will be selling its Pringles potato chip business to Kellogg for about $2.7 billion in cash.
Abercrombie & Fitch Co. (NYSE:ANF) shares surged 6.5 percent after reporting a fourth quarter profit of $19.6 million (22 cents per share). Sales in the quarter also increased 16 percent to $1.33 billion.
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Hartford Financial Services Group Inc. (NYSE:HIG) jumped 6.2 percent after replying back to John Paulson’s proposal to spin off its property and casualty business from its life insurance business. The company replied, “We recognize there are potential benefits to a separation of the P&C and life companies. … While there are challenges to successfully executing a separation, we welcome Paulson’s views and look forward to continued dialogue with him and other shareholders,” Shares of Metlife Inc. (NYSE:MET) also increased 2.6 percent this morning.
Shares of Dell Inc. (NASDAQ:DELL) fell more than 1 percent after being downgraded from neutral to underperform at Sterne Agee, with a price target of $15 per share. The majority of Dell’s business still comes from personal computers. “We do not find the risk reward compelling,” analysts from Sterne Agee said. Shares of Apple Inc. (NASDAQ:AAPL) and Hewlett-Packard Co. (NYSE:HPQ) climbed higher in early trading.
Despite reporting a decrease in fourth quarter profits, shares of Devon Energy Corp. (NYSE:DVN) climbed nearly 3 percent higher. The company earned $507 million ($1.25 per share), compared to $562 million ($1.29 per share) a year earlier.
Dean Foods Co. (NYSE:DF) shares surged 9.4 percent after reporting better than expected fourth quarter earnings. The company also said its earnings outlook for the year is inline with analyst estimates. The company said, “After two years of significant pressure on the fluid-milk business, our continued efforts to reduce costs and the stabilization of milk costs led to growth.”
Investor Insight: How Badly is Apple Undervalued?
Zynga Inc. (NASDAQ:ZNGA) shares dropped almost 10 percent this morning. Late Tuesday, the social gaming company reported a net loss of $435 million ($1.22 per share) for the fourth quarter. Revenues increased 59 percent to $311.2 million.
Comcast, Dean Foods, Kellogg, WellCare, Deere Among Most Active Stocks Feb 15
Comcast Corporation (NASDAQ:CMCSA): Comcast reported Q4 EPS of 47c, compared with analysts’ consensus estimate of 41c. The company’s revenue also came in higher than expected. Moreover, Comcast announced that it would raise its dividend 44%, to 65c per share per year, and said it would repurchase $6.5B of its own shares in 2012. Comcast’s high-speed Internet revenue surged 10.1%, and its business service revenue jumped 36.8%. The company lost 17,000 video customers in Q4, the lowest number of customer it has lost in almost five years. Comcast believes that its improvements are sustainable, according to the company’s CEO Brian Roberts. “As we begin 2012, the strength of our businesses and free cash flow generation will allow us to continue to build value and consistently return capital to shareholders,” said Roberts. In early trading, Comcast rose $1.49, or 5.47%, to $28.74. Other cable companies also advanced, with Time Warner Cable (NYSE:TWC) adding $1.29, or 1.70%, to $77.21 and Cablevision (NYSE:CVC) climbing 27c, or 1.86%, to $14.82. Shares of Comcast Corporation are trading 5.8% higher today.
Dean Foods Company (NYSE:DF): For Fresh Dairy Direct, says category weakness and pricing pressures remain a concern. For WhiteWave-Alpro, sees solid FY top-line performance supported by new product launches. Sees continued momentum in Morningstar. Comments from slides that will be presented on the Q4 earnings conference call. Shares of Dean Foods Company are trading 12.88% higher today.
Kellogg Company (NYSE:K): Assuming the transaction closes on or around June 30, 2012, Kellogg expects that the transaction will: Be accretive to earnings in 2012 by between $0.08 and $0.10 per share before the impact of transaction and one-time costs and changes to the share repurchase program; including these items, the transaction will be dilutive to earnings per share in 2012 by between $0.11 and $0.16 per share. Generate one-time costs of between $160 million and $180 million. The company expects that between $70 million and $90 million of these costs will be recognized in 2012, a lesser amount in 2013, and the remainder in 2014. Generate synergies of at least $10 million in 2012, more in 2013 and ongoing synergies of between $50 million and $75 million a year thereafter Shares of Kellogg Company are trading 4.85% higher today.
WellCare Health Plans, Inc. (NYSE:WCG): Membership as of December 31, increased 15% year over year to 2.6M compared with 2.2M members as of December 31, 2010. PDP segment membership increased 208,000 year over year, or 27%. Medicare Advantage membership increased year over year by 19,000 members, or 16%. Medicaid segment membership increased by 111,000, or 8%, year over year to 1.5M members as of December 31, 2011. Shares of WellCare Health Plans, Inc. are trading 10.77% higher today.
Deere & Company (NYSE:DE): Full-year industry sales in the EU 27 nations of Western and Central Europe are forecast to be flat to up 5% as favorable conditions in the grain, livestock and dairy sectors outweigh general economic concerns. Sales in the Commonwealth of Independent States are expected to be considerably higher in 2012, while sales in Asia are forecast to increase moderately. In South America, industry sales for the year are projected to be flat to down 5%, vs attractive levels of 2011, due to drought conditions in Argentina and southern Brazil. U.S. and Canada industry sales of turf and utility equipment are expected to increase slightly in 2012. Shares of Deere & Company are trading 3.13% lower today.
Active Equities: BioCryst, Dr. Pepper, Owens Corning, iPass, Cimarex Feb. 15
BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX): BioCryst Pharmaceuticals announced favorable preclinical results for BCX5191, a novel adenine nucleoside analog targeting viral RNA polymerase for the potential treatment of hepatitis C. BioCryst has successfully completed in vitro and in vivo studies in which BCX5191 exhibited potent and selective pan-genotypic antiviral activity against the hepatitis C polymerase enzyme. BCX5191 showed no inhibition of human RNA polymerase and no evidence of toxicity from standard in vitro screens. Shares of BioCryst Pharmaceuticals, Inc. are trading 9.26% higher today.
Dr Pepper Snapple Group Inc. (NYSE:DPS): The company expects full year reported net sales growth near the low end of its long-term 3% to 5% range. Packaging and ingredient costs are expected to increase COGS between 2% and 3%, on a constant volume/mix basis. The company expects its tax rate to be approximately 37%. The company expects capital spending to be approximately 4.0% of net sales. Shares of Dr Pepper Snapple Group Inc. are trading 2.12% higher today.
Owens Corning (NYSE:OC): The company is taking actions in its Composites segment to balance supply, to enable its assets in Europe to operate at a sustainable competitive cost position, and to leverage low-cost assets by year-end 2012. In conjunction with these actions, the company anticipates incurring approximately $130M in charges in 2012 through early 2013, of which approximately half represent cash expenditures. Shares of Owens Corning are trading 3.6% lower today.
iPass Inc. (NASDAQ:IPAS): iPass (NASDAQ:IPAS) announced that China Telecom has joined the iPass Open Mobile Exchange, or iPass OMX, the largest global Wi-Fi exchange community, to provide international Wi-Fi roaming services through iPass for China Telecom subscribers. China Telecom customers travelling internationally will have access to the world’s largest commercial Wi-Fi network. Shares of iPass Inc. are trading 12.64% higher today.
Cimarex Energy Co. (NYSE:XEC): Sees 2012 Gulf Coast volumes average 35-40 Mmcfe/D. Sees 2012 Mid-Continent, Permian production volumes up 19%-25%. Sees 2012 Mid-Continent, Permian production averaging between 580-610 Mmcfe/D. Shares of Cimarex Energy Co. are trading 10.05% higher today.
Market Recap: Stocks Slip as Greek Bailout Decision Postponed
Markets closed down on Wall Street today: Dow -0.76%, S&P -0.54%, Nasdaq -0.55%, Oil +1.27%, Gold +0.72%.
On the commodities front, Oil (NYSE:USO) rose to $102.02 a barrel. Precious metals were also up, with Gold (NYSE:GLD) rising to $1,730.00 an ounce while Silver (NYSE:SLV) rose 0.13% to settle at $33.39.
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Today’s markets were down because:
1) Greece. You may be asking yourself, What could Greece have possibly done this time? Well, nothing, and that’s the problem. Greece still remains on the brink of disaster, a little piece of land it has called home since 2010. Greece’s progress has been gruelingly slow, and at times non-existent. Now that the government has acquiesced to the euro zone’s demands for austerity, all that’s left to do is await finance ministers’ approval, which many had anticipated would come on Wednesday at a meeting that was ultimately canceled at the last minute. Though the meeting was rescheduled for the beginning of next week, and finance ministers have hinted they will approve the latest economic reform proposal, which Greece needs in order to secure its next bailout, no one wants to count their chickens before they hatch.
2) Euro. The overall euro-zone economy shrank in the fourth quarter of 2011 for the first time since 2009, but the 0.3 percent decline was not as bad as economists had expected. The latest figures were helped by a smaller-than-expected decline in Germany’s gross domestic product, and unexpected growth in France. Meanwhile, China pledged to invest in Europe’s bailout funds while sustaining its holdings of euro assets. Chinese Premier Wen Jiabao said, “China is firm in supporting the EU side in dealing with the debt problems,” assuaging fears over the the euro zone’s seeming inability to effectively combat the debt crisis.
3) Companies. The day held much in the way of corporate news, with Comcast (NASDAQ:CMCSA) shares jumping after the cable provider beat estimates for its fourth-quarter profit and revenue, and announced a 44 percent increase to its dividend as well as a $6.5 billion stock buyback program. Abercrombie & Fitch (NYSE:ANF) and Dean Foods (NYSE:DF) were also trading higher, though both reported fourth-quarter losses, while higher-than-expected fourth-quarter profit boosted shares of Devon Energy (NYSE:DVN). Procter & Gamble (NYSE:PG) and Kellogg (NYSE:K) were trading higher after the latter agreed to pay the former $2.7 billion to buy its Pringles potato chip unit, while Zynga (NASDAQ:ZNGA) sank after the social gaming company posted a $404 million loss for its full fiscal year.
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