Wall Street Breakfast: Must-Know News

• Markets, economists predict Fed cut and pause. The Fed will most likely cut its target short-term rate by 0.25% to 2% next week, although it is also considering no change, Fed watcher Greg Ip says. A rate cut may also be accompanied by a signal of a pause as the Fed stands back and observes whether they've done enough to spur a second-half recovery, or perhaps too much. Futures markets anticipate a 0.25% cut and a pause.
• Colleges go to bat for students. Students have $6.7B less to borrow this year after student-lenders were hit by a credit crunch and a cut in loan subsidies. Schools are turning to the Education Department's Direct Loan Program.
• Foreclosure rescue plan moves forward. A House panel approved a $15B foreclosure package that will enable local governments to purchase foreclosed homes.
• Something's cooking at Wendy's. Sources say Wendy's (WEN) will announce a deal with activist investor Nelson Peltz today, the nature and price-tag of which remain a mystery. Peltz has been pressuring Wendy's to sell itself for a year, but the subsequent liquidity dry-up made it impossible to find a reasonable bid.
• Starbucks warns, shares slide. Starbucks (SBUX) lowered its Q2 and 2008 guidance, sending shares plunging 10.7% in AH trading. Starbucks now sees Q2 EPS of $0.15 vs. a consensus of $0.21, and a midsingle-digit percentage decline in U.S. comparable-store sales due to falling traffic. Given its YTD results and expectations of continued U.S. consumer weakness, it now expects 2008 EPS to be somewhat lower than the $0.87 it earned in 2007; consensus had been $0.97. CEO Howard Schultz's comeback plan has been the subject of some criticism. "Outside of maybe closing underperforming stores, a lot of the stuff he talked about was kind of touchy-feely stuff, like bringing back the spirit of Starbucks. A lot of that stuff is hard to drop to the bottom line," one analyst said.
• Toyota (TM) posted a 3% global sales gain in Q1, but fell 6% in the U.S. Through March, Toyota sold 2.41M vehicles to GM's (GM) 2.25M.
• GE scoops up debt at discount. General Electric's (GE) Real Estate unit bought a €1.22B ($2.5B) European commercial property loan portfolio at a discount from Capmark Europe. The discount is said to be about 8%.
• Shanghai soars. Shanghai jumped 9.29% after Beijing cut taxes on stock transactions. "My estimation is that investors may save about 120 billion yuan in stamp duties in the coming 12 months. Some of this money will slosh in the markets instead, pushing up prices," an analyst said.
• Second-half bounce? David McCormick, the Treasury's Under Secretary for International Affairs, said Thursday the U.S. may improve slightly in the second half due to the $150B fiscal stimulus program which will help create 500,000 new jobs.

Earnings

• Apple (AAPL): FQ2 EPS of $1.16 beats consensus of $1.07. Revenue of $7.51B vs. consensus of $6.96B. Apple sees Q3 EPS of about $1.00, less than consensus of $1.10, and revenue of about $7.2B, in line. Gross margin fell to 32.9% from 35.1% Y/Y. Mac shipments soared 51% from a year ago, and now account for 47% of AAPL's total revenue. It sold 1.7M iPhones, in line with estimates. iPod sales were up just 1% to 10.6M. Shares are down 0.8% in pre-market trading. "The Mac business is on fire," Piper Jaffray's Gene Muster said. But "investors wanted more of the phenomenal revenue flowing through to the bottom line."
• Aetna (AET): Q1 EPS of $0.92 in line. Revenue of $7.74B in line. Sees 2008 EPS of about $4.00 in line.
• Allstate (ALL): Q1 EPS of $1.33 misses consensus of $1.63. Revenue $8.09B vs. consensus of $8.87B.
• Amazon.com (AMZN): Q1 EPS of $0.34 beats consensus of $0.32. Revenue of $4.13B vs. consensus of $4.08B. Sees Q2 sales $3.875-4.075M, better than consensus of $3.84B.
• AstraZeneca (AZN): Q1 EPS of $1.28 beats consensus of $1.19. Revenue of $7.67B vs. consensus of $7.55B. Sees 2008 EPS of $4.45-$4.75, better than consensus of $4.28.
• Black & Decker (BDK): Q1 EPS of $1.09 falls short of consensus of $1.14. Revenue of $1.49B was in line. Sees 2008 EPS of $5.25-5.65, short of consensus of $5.53.
• Bristol-Myers (BMY): Q1 EPS of $0.42 beats by a penny. Revenue of $5.18B in line. Reaffirms 2008 EPS guidance of $1.60-1.70 vs. consensus of $1.70.
• Canon (CAJ): Q1 profit fell 18.7% due to a slowing global economy and a stronger yen to ¥106.64B ($1.03B). Revenue was ¥1T ($9.77B). Canon lowered its full-year profit forecast to ¥500B from ¥520B, but still projects record earnings.
• Chipotle Mexican Grill (CMG): Q1 EPS of $0.52 beats consensus of $0.48. Revenue of $305.3M vs. consensus of $298.4M. Expects 2008 comparable restaurant sales growth in the mid-single-digits.
• Citrix Systems (CTXS): Q1 EPS $0.35 just ahead of consensus of $0.34. Revenue of $377M vs. consensus of $372M. Sees Q2 EPS of $0.35-$0.38 and revenue of $380-390M, below consensus of $0.38 and $393M. Sees 2008 EPS of $1.54-$1.64 and revenue of $1.6-1.645B, way below consensus of $2.02.
• Credit Suisse (CS): Q1 net loss of CHF 2.15B after taking a CHF 5.3B ($5.2B) writedown on CDOs, LBO debt and mortgage-backed securities. Net revenue was CHF 3.02B, down 72%. "The number of times people have seen the light at the end of the tunnel it turned out to be a train coming down the tracks," CEO Brady Dougan said. CDO and leveraged-loan exposure was down considerably. "The fact that they have trimmed their exposure so dramatically is good, and to me means this is the last unprofitable quarter," Landsbanki Kepler analyst Dirk Becker said. Shares were up 2.1% in pre-market trading.
• Ford (F): Q1 EPS of $0.05, far better than the consensus of -$0.16. Revenue of $39.4B vs. consensus of $38.46B. CEO Alan Mulally said the remainder of year will be a challenge, but that he's cautiously optimistic.
• Dow Chemical (DOW): Q1 EPS of $0.99 beats consensus of $0.94. Revenue of $14.8B (+19%) vs. $13.61B consensus.
• Fortune Brands (FO): Q1 EPS of $0.75 misses consensus of $0.78. Revenue of $1.81B in line.
• Hertz Global (HTZ): Q1 EPS of $0.02 beats consensus of $0. Revenue of $2.04B vs. consensus of $1.94B. Sees 2008 EPS of $1.38-1.44 vs. consensus of $1.41, and revenue of $8.9-$9B vs. consensus of $8.94B
• L-3 (LLL): Q1 EPS of $1.54 beats consensus of $1.51. Revenue of $3.51B in line. Raises 2008 EPS outlook to $6.56-6.70 from $6.48-6.62; consensus was $6.58. Raised full-year revenue view to $14.5-14.7B from $14.2-14.4B; consensus was $14.45B.
• LSI Corp. (LSI): Q1 EPS of $0.10 beats consensus of $0.07. Revenue of $661M vs. consensus of $636M. Sees Q2 EPS of $0.08-0.12 and revenue of $650M-$680M, higher than consensus of $0.07 and $634.6M.
• 3M (MMM): Q1 EPS of $1.38 beats consensus of $1.35. Revenue of $6.5B vs. consensus $6.34B.
• Motorola (MOT): Q1 loss of $0.09/share, worse than consensus of $0.07. Revenue of $7.45B vs. consensus of $7.75B. Sees Q2 EPS of -$0.02-0.04 vs. consensus of $0.01.
• Newell Rubbermaid (NWL): Q1 EPS of $0.27 in line. Revenue of $1.43B in line.
• Newfield Exploration (NFX): Q1 EPS of $0.87 beats consensus of $0.73. Revenue of $515M vs. consensus of $442.66M.
• Nintendo (NTDOY): Full-year net profit increased 48% to ¥257.3B ($2.49B). Sales rose 73% to ¥1.67T. Nintendo has sold 24.5M Wiis vs. about 13M PlayStation 3s for Sony (SNE); it expects to sell another 25M in the coming year, but sees more modest growth (+26%) in net profit to ¥325B, an 8% increase in sales to ¥1.8T, and a 9% rise in operating profit to ¥530B. Nintendo is struggling with the yen's appreciation.
• Noble (NE): Q1 EPS of $1.43 beats consensus of $1.31. Revenue of $861M vs. consensus of $843M.
• NutriSystem (NTRI): Q1 EPS of $0.42 beats by $0.01. Revenue of $216.5M in line. Sees Q2 revenue of $180M-$190M in line. Sees 2008 revenue of $700M-$720M vs. consensus of $718.89M.
• PepsiCo (PEP): Q1 EPS of $0.70 was in line. Revenue of $8.33B vs. consensus $7.97B. Pepsi expects 3-5% volume growth in 2008.
• Potash (POT): Q1 EPS of $1.74 beats consensus of $1.52. Revenue of $1.8B vs. consensus of $1.67B. Sees Q2 EPS of $2.20-2.50, better than consensus of $2.27. Potash raised its 2008 EPS forecast to $9.50-10.50 from $6.25-$7.25, vs. consensus of $8.62. Shares are up 3.9% in the pre-market.
• Pulte Homes (PHM): Q1 EPS of -$2.75, worse than consensus of -$0.77. Revenue of $1.4B in line. Pulte took a $664M charge related to inventory impairments and other land-related charges.
• Raytheon (RTN): Q1 EPS of $0.92 beat consensus of $0.84. Revenue of $5.35M vs. consensus of $5.12B. Sees 2008 EPS of $3.65-3.80, below consensus of $3.89, and revenue of $22.4-$22.9B vs. consensus of $22.82B.
• QUALCOMM (QCOM): FQ2 EPS of $0.54 beats consensus of $0.52. Revenue of $2.61B vs. consensus of $2.5B. Sees Q3 EPS of $0.50-0.52, in line, and revenue of $2.5-$2.7B vs. consensus of $2.47B.
• Starwood Hotels (HOT): Q1 EPS of $0.42 beats consensus of $0.25. Revenue of $1.46B vs. consensus $1.24B. Sees 2008 EPS of $2.40-2.58 vs. consensus of $2.42.
• Taser (TASR): Q1 EPS of $0.02, short of consensus of $0.05. Revenue of $22.5M vs. consensus of $26M.
• Whirlpool (WHR): Q1 EPS of $1.22 falls short of consensus of $1.57. Revenue of $4.61B vs. consensus of $4.46B. Sees 2008 EPS of $7.00-$7.50, well below consensus of $8.58.

Today's Markets

• In Asia Thursday, Shanghai soared 9.29% to 3,583. Things were otherwise tame: Hang Seng +1.55%. Nikkei -0.28%. BSE Sensex +0.14%.
• In Europe, markets are down sharply at midday. FTSE -1.97% to 5,963. CAC -1.41% to 4,875. DAX -0.87% to 6,736.
• U.S. index futures are lower at 7:40 AM. Dow -0.38% to 12,700. S&P -0.45% to 1,373. Nasdaq -0.52% to 1,895.

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Comments

[ramankandola]

Citi raised target from $ 212 to $ 248 24-Apr-08 04:32 am Correct story line #2, thanks Emerald, Ouch

Citi raised target from $212 to $248
24 April 2008, Apple Inc (AAPL), Citi raises target.


Unit Shipment Upside in ALL Product Categories;

Reiterate Buy

Call — Apple remains our top hardware pick through calendar year-end, with a new $248 12-month target, following a 7-8% revenue beat (Google also beat by 7-8%) with upside from all product lines in 1CQ08. A steady stream of new product announcements between June and September should allow the company to continue to gain significant market share in PCs and handsets during 2HCY08. Component Tailwind in 2CQ — We had expected higher gross margin in 1CQ and now believe that Apple entered the quarter with a significant amount of memory inventory procured at higher prices during 4CQ. However, as Apple procures memory in 2CQ at prevailing contract prices, the company should benefit from the component cost tailwind that we had expected last quarter.

9 June is D-Day for 3G — The first of an impressive wave of new products will be a new 3G iPhone and the iPhone Software Development Kit (SDK). During
the subsequent three months, we expect a complete refresh of the laptop and iPod lines. The SDK should yield hundreds of compelling iPhone/iPod touch
third-party apps for by Christmas. Little Change to Above-Consensus FY09/10 Ests — An increase in revenue
estimates for all future periods is mostly offset by more-conservative assumptions on monthly residuals from cell phone carrier partners. We have reduced carrier residuals in anticipation of more traditional carrier relationships with forthcoming carrier partners around the world.

[deaverb]

Again a great start to the day.

[SA EditorEli Hoffmann]

Thanks for your generous feedback, DeaverB.

[vaduz]

as always a good set of information

[hugoh]

Very nice earnings recap. Thanks.

[falcon56l]

good info. keep it coming.