Stocks in the news Wednesday
From Standard & Poor's Equity ResearchGeneral Motors (GM) and Ford (F) are likely to be in focus on reports that the U.S. House of Representatives could vote today on a $15 billion plan to bail out and restructure U.S. automakers but the initiative may face Republican roadblocks in the Senate.
Electronic Arts (ERTS) says revenue and EPS for fiscal year 2009 will be below financial guidance, previously provided on Oct. 30. Cites lower-than-expected sales across North America and Europe. Wedbush Morgan downgrades to buy from strong buy.
Cowen downgrades MasterCard (MA) and Visa (V) to underperform from outperform. Also, Cowen cuts Paychex (PAYX) to underperform from neutral.
American Express (AXP) falls 1.60 to 21.69 after Citigroup initiates coverage of AXP with a sell opinion and initiates coverage of the credit card group with negative outlook. Banc of America reportedly initiates coverage of AXP with a sell.
Yahoo (YHOO) rises 0.71 to 12.90 on news that Ivory Investment Management LP, one of YHOO's largest stockholders, proposes to YHOO's Board that YHOO salvage a deal with Microsoft (MSFT). Under the proposal, MSFT would own, operate the combined search platform, with YHOO becoming an affiliate that retains 80% of the revenue generated through searches on its own site. Finally, MSFT would become the search engine for YHOO's existing search affiliates. Ivory believes a search deal with MSFT could deliver value to YHOO shareholders of $24-$29 per share. S&P reiterates buy.
A.O. Smith (AOS) expects fourth quarter results will be weaker than expected due to sluggish demand in water heater, electric motor businesses. Now sees $0.15-$0.25 fourth quarter EPS, $2.63-$2.73 2008 (vs. previous $2.80-$2.90 estimate). Separately, agrees to acquire its largest stockholder, Smith Investment Co., whereby holders of Smith Investment will be entitled to receive 2.396 AOS Class A common shares and 0.463 AOS common shares for each Smith Investment share held.
Actuant (ATU) expects first quarter EPS of $0.44-$0.45, exclusive of asset impairment charge, on revenues of about $375-$380 million. For fiscal year 2009, sees EPS $1.60-$1.80 on $1.50-$1.55 billion revenue. It cites greater-than-expected weakness in consumer facing businesses serving DIY electrical, marine and recreational vehicle (RV) markets. Also experiencing substantially weaker demand in the truck, automotive and off-road equipment markets, including Europe.
Korn/Ferry International (KFY) posts better-than-expected $0.30, vs. $0.37 a year ago, second quarter EPS on 3.6% lower fee revenue, 3.4% total revenue decline. Sees third quarter fee revenue of $140-$160 million and EPS of $0.08-$0.18, prior to about $11-$15 million in expenses related to rationalizing the cost structure to current economic environment. Says due to current extraordinary economic conditions, ability to predict new business is more difficult than normal. If new business deteriorates, the company's results may be below this guidance.
Rio Tinto (RTP) says due to sharp falls in commodity prices, significantly weaker outlook it will reduce 2009 total capital expenditure from over $9 billion to $4 billion, of which $2 billion will be sustaining capital expenditure. To reduce global headcount by 14,000, comprising 8,500 contractor jobs, 5,500 employee roles. Says it committed to reducing further net debt by $10 billion by end of 2009. Expanding scope of assets targeted for divestment.
Eastman Kodak (EK) withdraws its second half and full-year 2008 guidance for revenue growth, digital revenue growth, EPS from continuing operations, cash generation, expects all to be below its October forecast. Cites deepening global recession, changes in the value of the dollar. Does not provide a revised forecast, but says it will update investors on business performance when it announces its fourth quarter, full-year 2008 results on Jan. 29, 2009.
ADC Telecommunications (ADCT) posts better-than-expected $0.19, vs. $0.30, fourth quarter non-GAAP EPS as narrowed gross margin offset 10% sales rise. Street was looking for $0.13. Due to extraordinary level of uncertainty in marketplace and economy, ADCT says it will only provide guidance for the first quarter. Sees first quarter sales of $255-$290 million, GAAP loss from continuing operations of $0.05-$0.07 (includes non-cash acquisition amortization charges of $0.09, stock option expense of $0.02). Morgan Keegan reportedly downgrades to market perform.
WSJ reports that American International Group (AIG) owes Wall Street's biggest firms about $10 billion for speculative trades that have soured, according to people familiar with the matter, underscoring the challenges the insurer faces as it seeks to recover under a U.S. government rescue plan. The details of the trades go beyond what AIG has explained to investors about the nature of its risk-taking operations, which led to the firm's near-collapse in September.
Genzyme (GENZ) announces that the FDA's Orthopaedic and Rehabilitation Devices Advisory Committee voted unanimously in favor of approval without conditions of Synvisc-One, which is intended for the relief of pain associated with osteoarthritis of the knee. The committee made this determination based on the clinical trial results GENZ submitted to support the Premarket Approval (PMA) application supplement for Synvisc-One. S&P reiterates strong buy.
Praxair (PX) cuts fourth quarter EPS view to $0.95-$1.00, excluding charges, due to fall-off in demand in November. Expects additional customer plant closings in December which will further reduce volumes for the quarter. Sees 2008 EPS of $4.13-$4.18, before charges. Street was looking for fourth quarter EPS of $1.04 and 2008 EPS of $4.22.
Focus Media Holdings (FMCN) announces that it plans to terminate its remaining wireless advertising business and said it expects to incur restructuring charges of about $200 million in fourth quarter related to its CGEN in-store advertising business.
G-III Apparel Group (GIII) posts $1.68, vs. $1.41, third quarter EPS on 30% sales rise. Cuts fiscal year 2009 guidance to $0.95-$1.05 on sales of about $715 million, down from previous outlook of $1.35-$1.40 EPS on sales of $730 million.