Wall Street Breakfast: Must-Know News
- Jobs debuts the iPad. At long last, Apple (AAPL) unveiled the iPad, a tablet computer with a 9.7-inch touch display and ten hours of battery life. The device is unlocked and AT&T (T) will provide no-contract 3G service. The biggest surprise wasn't any of the features of the iPad but the aggressive pricing: $499 for an entry-level model, half as much as many analysts had expected and around the same as Amazon's (AMZN) Kindle DX. The iPad will also try to steal marketshare from e-readers with its iBookstore, and has already signed Penguin, HarperCollins, Simon Schuster, Macmillan and Hachette as initial partners. Despite the relatively low pricing, many worry that the iPad will fail as past tablet attempts have, though analyst Gene Munster suggests the iPad will succeed if given a year or so to enter the broader consumer market and with a price cut to the $300-400 range.
- Toyota expands recall. After halting the sales of most of its popular models in the U.S. on Tuesday, Toyota (TM) expanded its recall late yesterday, announcing it would have to fix another 1.1M vehicles because of safety concerns. In total, Toyota has now recalled nearly 6M vehicles for problems related to the accelerator pedal, and has halted production in response to government pressure. Toyota dealerships are unsure what to do with the glut of unsellable cars on their lots, major car rental agencies including Avis (CAR) and Hertz (HTZ) said they're pulling Toyota cars from their rental fleets, and competitors like GM are using this opportunity to try to steal marketshare.
- UBS tax evasion deal falls apart. The Swiss government backed away from an agreement with the U.S. to hand over the names of U.S. clients of UBS (UBS) who were suspected of tax evasion. The development follows rulings from two Swiss courts that said disclosing the names would be a violation of Switzerland's secrecy laws. The Swiss cabinet said it would continue talks with the U.S. on the matter but acknowledged the risk that the U.S. could resume its civil proceedings against UBS.
- Obama's hopeful State of the Union. Obama delivered his State of the Union address last night, with a renewed pledge to implement the changes he campaigned on. He spoke about job creation and touched on financial reform but didn't try to assign blame for the crisis, telling Americans "I am not interested in punishing banks, I'm interested in protecting our economy." Other topics in his speech included the need for deficit reduction, and the importance of healthcare reform, though Obama signaled it would no longer be the center of his legislative agenda.
- Lawmakers grill Geithner on AIG. In a congressional hearing yesterday, Geithner said he took "full responsibility, and great pride" in his decisions about AIG's (AIG) bailout, while lawmakers from both parties expressed their anger at Geithner and the New York Federal Reserve for giving banks a "piggybank full of taxpayer dollars" and then adopting an "absolute code of silence" on disclosures. Following the hearing, Rep. Darrell Issa released the list of toxic assets that the NY Fed bought from AIG's counterparties for 100 cents on the dollar; the NY Fed had asked for the details to be kept private until 2018, but Issa said the short-term nature of many of the assets made long-term secrecy nonsensical. (Read Geithner's prepared testimony)
- No surprises from FOMC. The Federal Open Market Committee kept rates at 0-0.25%, as expected, and said it anticipates "exceptionally low levels of the federal funds rate for an extended period." Kansas City Fed President Thomas Hoenig disagreed with the "extended period" wording, saying the economy has continued to strengthen and the Fed should no longer commit to keeping rates low. The Fed will complete its purchases of $1.25T of mortgage-backed securities by March 31.
- Swap lines no more. The Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank said yesterday they plan to let temporary dollar swap lines expire on February 1. The lines were meant to provide global dollar liquidity during the financial crisis, but the ECB said the lines "are no longer needed given the improvements seen in the functioning of financial markets over the past year."
- SEC rules on money markets, climate. The SEC voted to tighten its rules for money market funds, requiring them to hold some assets that can be easily converted to cash and to disclose new information on fund values. The move came in response to Reserve Primary Fund, which "broke the buck" in September 2008 and exposed investors to losses. In a separate 3-2 vote, the SEC decided for the first time that public companies should warn investors of any serious risks that global warming might pose to their businesses.
- Bunge sells Brazil assets to Vale. Major sugar producer Bunge (BG) will sell its Brazilian fertilizer assets to Vale (VALE) for $3.8B in cash. The deal will allow Vale to bulk up on in-country assets as Brazil tries to reduce dependence on crop nutrient imports. It will also give Bunge enough cash that it may consider reviving a pursuit of Corn Products International (CPO) that it abandoned in late 2008 as the crisis hit.
- NY AG subpoenas online retailers. New York Attorney General Andrew Cuomo has subpoenaed 22 major online retailers, including Barnes & Nobles (BKS), Avon (AVP) and Staples (SPLS), over deals directing shoppers to discount clubs that often charge hidden fees. Cuomo said online shoppers are often "unknowingly" directed to the third-party sites and that the arrangements often transfer credit or debit card information without customers' knowledge.
- Bernanke vote moves forward. The Senate will have a procedural vote today on whether to confirm Bernanke for a second term as head of the Federal Reserve. Senate aides said the final confirmation vote would likely take place today as well, and Bernanke is expected to get the 60 votes he needs.
- Icahn's proxy battle, again. Proxy materials have reportedly been delivered to Biogen Idec (BIIB) by Carl Icahn. A new proxy fight with Biogen would be Icahn's third in as many years as he aims for greater control of the biotech firm. Sources say the new proxy material calls for three new Icahn representatives to be nominated to Biogen's board; Icahn already has two representatives on the 12-member board.
- Foreclosure problem spreading. One in eight Las Vegas homes went into foreclosure in 2009 as cities in four Sun Belt states (NV, FL, CA, AZ) accounted for all top 20 foreclosure hot spots, according to RealtyTrac's 2009 Metropolitan Foreclosure Market Report. California accounted for nine of the top 20 metro foreclosure rates, followed by Florida with eight, Nevada with two and Arizona with one. Less expected was a massive jump in Provo UT and Boise City, ID - which both saw foreclosures up more than 100% from 2008. "While it was expected that cities from states with the highest levels of foreclosure activity would top the charts, there is evidence that we're entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we've seen over the past few years," RealtyTrac said.
- Tough week for IPOs. The IPO market is getting off to a bumpy start in 2010: FriendFinder Networks, which was supposed to start trading today, rescheduled its launch for next week, while realtor chain IFM Investments, which was due to launch yesterday, will instead begin trading today at a reduced asking price.
- Home sales decline. New home sales fell 7.6% in December to 342K vs. 365K expected, and 355K in November. The supply of houses increased to 8.1 months vs. 7.9 prior. The median home price was $221,300.
Earnings: Thursday Before Open
- AU Optronics (AUO): Q4 EPS of -$0.25 misses by $0.37. Revenue of $3.6B (+97%) vs. $3.4B. (PR)
- Becton Dickinson (BDX): FQ1 EPS of $1.30 beats by $0.10. Revenue of $1.9B (+12%) vs. $1.8B. (PR)
- Check Point Software (CHKP): Q4 EPS of $0.61 beats by $0.04. Revenue of $272M (+25%) vs. $258M. (PR)
- Danaher (DHR): Q4 EPS of $1.12 beats by $0.09. Revenue of $3.1B (-1%) vs. $3B. (PR)
- Eli Lilly (LLY): Q4 EPS of $0.91 misses by $0.01. Revenue of $5.9B (+13%) vs. $5.7B. (PR)
- Estee Lauder (EL): FQ2 EPS of $1.28 beats by $0.07. Revenue of $2.2B (+11%) in-line. (PR)
- Lockheed Martin (LMT): Q4 EPS of $2.17 beats by $0.18. Revenue of $12.5B (+13%) vs. $12.4B. (PR)
- Potash (POT): Q4 EPS of $0.80 beats by $0.02. Revenue of $1.1B (-41%) vs. $1.07B. (PR)
- Taiwan Semi (TSM): Q4 EPS of $0.19 in-line. Revenue of $2.8B (+43%) in-line. Shares -0.1% premarket. (PR)
- Time Warner Cable (TWC): Q4 EPS of $0.91 beats by $0.03. Revenue of $4.5B (+3%) in-line. (PR)
- Tyco International (TYC): FQ1 EPS of $0.65 beats by $0.05. Revenue of $4.2B (-4%) in-line. (PR)
Earnings: Wednesday After Close
- AmeriCredit (ACF): FQ2 EPS of $0.33 beats by $0.25. Revenue of $387M (-31%) vs. $389M. Shares +0.05% AH. (PR)
- Amylin Pharmaceuticals (AMLN): Q4 EPS of -$0.35 misses by $0.05. Revenue of $186M (flat) vs. $219M. Shares -1.6% AH. (PR, earnings call transcript)
- Astoria Financial (AF): Q4 EPS of $0.09 beats by $0.01. Net interest income of $105M (-9%). (PR)
- BMC Software (BMC): FQ3 EPS of $0.76 beats by $0.08. Revenue of $508M (+4%) vs. $493M. Sees full-year EPS of $2.64-2.72 vs. $2.61. Shares +2% AH. (PR, earnings call transcript)
- Citrix Systems (CTXS): Q4 EPS of $0.66 beats by $0.14. Revenue of $451M (+8%) vs. $432M. Shares -4.2% AH. (PR, earnings call transcript)
- Crown Castle International (CCI): Q4 EPS of $0.04 beats by $0.05. Revenue of $444M (+13%) vs. $436M. Sees Q1 EPS of -$0.15 to -$0.25 vs. $0.00, and 2010 EPS of -$0.21 to $0.01 vs. $0.12. Shares -0.4% AH. (PR)
- Duke Realty (DRE): Q4 FFO of $0.31 beats by $0.03. Revenue of $340M (-11%) vs. $222M. Shares -1.4% AH. (PR)
- E*TRADE Financial (ETFC): Q4 EPS of -$0.04 in-line. Revenue of $523M (+8%) vs. $241M. Shares +1.2% AH. (PR, earnings call transcript)
- Flextronics International (FLEX): FQ3 EPS of $0.17 beats by $0.02. Revenue of $6.6B vs. $6.3B. Shares -5.4% AH. (PR, earnings call transcript)
- Fortinet (FTNT): Q4 EPS of $0.13 beats by $0.06. Revenue of $71M (+20%) vs. $67M. Shares -1.6% AH. (PR)
- Green Mountain Coffee Roasters (GMCR): FQ1 EPS of $0.27 beats by $0.11. Revenue of $349M (+77%) vs. $330M. Shares +1.6% AH. (PR, earnings call transcript)
- Intersil (ISIL): Q4 EPS of $0.18 beats by $0.02. Revenue of $178M (+36%) vs. $175M. Sees Q1 EPS of $0.18-0.20 vs. $0.15, on revenues of $180M-187M vs. $168M. Shares +1.2% AH. (PR, earnings call transcript)
- Lam Research (LRCX): FQ2 EPS of $0.47 beats by $0.07. Revenue of $487M (+72%) vs. $454M. Shares +0.1% AH. (PR, earnings call transcript)
- LSI Corp. (LSI): Q4 EPS of $0.18 beats by $0.07. Revenue of $638M (+5%) vs. $632M. Sees Q1 sales of $590M-620M vs. $580M. Shares -7.2% AH. (PR, earnings call transcript)
- Murphy Oil (MUR): Q4 EPS of $1.65 may not be comparable to estimate of $0.85; results include $185.3M after-tax benefit from anticipated royalty recovery. Revenue of $5.9B (+33%) vs. $3.9B. Sees Q1 EPS of $0.80-0.95 vs. $1.20. Shares -1.6% AH. (PR)
- Netflix (NFLX): Q4 EPS of $0.59 beats by $0.14. Revenue of $445M (+24%) vs. $446M. Subscribers grew 31% Y/Y, to 12.3M. Sees Q1 EPS of $0.47-0.58 vs. $0.44. Shares +16.8% AH. (PR, earnings call transcript)
- Noble (NE): Q4 EPS of $1.72 beats by $0.14. Revenue of $940M (+3%) vs. $896M. Shares +2% AH. (PR)
- Norfolk Southern (NSC): Q4 EPS of $0.82 misses by $0.02. Railway operating revenue of $2.1B (-16%) in-line. Shares -1.4% AH. (PR, earnings call transcript)
- Qualcomm (QCOM): FQ1 EPS of $0.62 beats by $0.06. Revenue of $2.7B (+6%) in-line. Sees Q2 EPS of $0.49-0.53 vs. $0.57, on revenues of $2.4B-2.6B vs. $2.75B. Shares -9.3% AH. (PR, earnings call transcript)
- Ryland Group (RYL): Q4 EPS of $0.11 beats by $0.37. Revenue of $418M (-21%) vs. $391M. Shares +1.7% AH. (PR)
- Symantec (SYMC): FQ3 EPS of $0.40 beats by $0.03. Revenue of $1.55B (+1%) vs. $1.5B. Sees Q4 EPS of $0.36-0.37 vs. $0.37. Shares -4.6% AH. (PR, earnings call transcript)
- Teradyne (TER): Q4 EPS of $0.17 beats by $0.02. Revenue of $267M (+37%) in-line. Sees Q1 EPS of $0.20-0.26 vs. $0.13, on revenue of $290M-310M vs. $269M. Shares +4.2% AH. (PR)
- In Asia, Nikkei +1.6% to 10,414. Hang Seng +1.6% to 20,356. Shanghai +0.25% to 2,994. BSE +0.1% to 16,307.
- In Europe at midday, London +0.2%. Paris +0.2%. Frankfurt +0.3%.
- Futures: Dow +0.1%. S&P +0.2%. Nasdaq +0.2%. Crude +0.7% to $74.20. Gold +0.3% to $1,088.20.
Thursday's Economic Calendar
- 8:30 Chicago Fed National Activity Index8:30 Durable Goods8:30 Initial Jobless Claims10:30 EIA Natural Gas Inventory11:00 KC Fed Manufacturing1:00 PM 7-Yr Note Auction4:30 PM Fed Balance Sheet4:30 PM Money Supply
- Notable earnings before Thursday's open: AEP, AUO, AVT, BAX, BDX, BEN, BMY, CAH, CELG, CHKP, CL, CNX, CY, D, DHR, EK, EL, F, GR, HP, IVZ, JBLU, JNS, LCC, LIFE, LLY, LMT, MJN, MMM, MO, MOT, NOK, ORI, OSK, OXY, PG, POT, RCL, RTN, SNE, T, TSM, TWC, TXT, TYC, UMPQ, XEL, ZMH
- Notable earnings after Thursday's close: AMCC, AMZN, ASIA, BCR, CA, CB, CPWR, GHL, GNW, ICO, INFA, JNPR, KLAC, LEG, MSFT, MXIM, OCLR, PMCS, QTM, RHI, RMBS, SNDK, SNV, THOR, TSRA
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.Complete Story »