Beyond the Numbers
Earnings, Europe Fail to Enthuse Markets
7/24/2012 9:15 AM
The major U.S. index futures are pointing to a modestly lower opening on Tuesday, with sentiment shaky amid lingering eurozone concerns. Even as debt worries rage, data released by Markit Economics earlier in the global trading day showed weakening private sector activity in the euro area. The troika is set to meet officials in Greece to discuss about the progress in the implementation of austerity measures that could help the nation secure further financial assistance. Domestic earnings have turned lackluster, with most companies falling short on revenues and also providing weak forward guidance. The lack of any other major economic report may lead to some indecision among traders amid the ongoing turbulent economic environment.
U.S. stocks closed notably lower on Monday amid intensifying eurozone worries. After opening sharply lower, the major U.S. averages moved gradually pared their losses over the course of the session yet still closed with steep losses. European debt fears returned with full force after Spanish 10-year bond yields rose to a new euro area higher after financial assistance requested by Valencia triggered speculation that the nation may be forced to seek a complete bailout.
The Dow Industrials fell 101.11 points or 0.79 percent before closing at 12,722 and the S&P 500 Index dropped 12.14 points or 0.89 percent to 1,351, while the Nasdaq Composite ended down 35.14 points or 1.20 percent at 2,890.
Twenty-four of the thirty Dow components closed lower, with Kraft Foods (KFT), McDonald’s (MCD) and Microsoft (MSFT) leading the slide. On the other hand, General (GE) and JP Morgan Chase (JPM) gained over 1 percent each.
Airline, biotechnology, resource, financial and technology stocks were among the biggest decliners of the session.Currency, Commodity Markets
Crude oil futures are slipping $0.65 to $87.49 a barrel after tumbling $3.69 to $88.14 a barrel on Monday in reaction to the European debt fears.
Gold futures are currently edging down $0.10 to $1,577.30 an ounce. In the previous session, the precious metal fell $5.40 to $1,577.40 an ounce.
Among currencies, the U.S. dollar is trading at 78.27 yen compared to the 78.39 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.2093 compared to yesterday’s $1.2117.Asia
The major Asian markets went about in a listless manner amid the economic anxieties before closing on a mixed note. Even as traders remained concerned about the European debt situation, a report showing a slowdown in the contraction of the Chinese manufacturing sector offered some consolation.
Japan’s Nikkei 225 average languished below the unchanged line for much of the session before closing down 20.23 points or 0.24 percent at 8,488. Toshiba and Kansai Electric were the biggest decliners among the index components. Utility, paper, realty and auto stocks also came under selling pressure.
Australia’s All Ordinaries moved about in a lackluster manner before moving decisively above the unchanged line in late trading. The index closed at 4,161, up merely 2 points or 0.05 percent. Energy and material stocks rebounded modestly following yesterday’s steep declines.
Hong Kong’s Hang Seng Index slid 150.27 points or 0.79 percent before closing at 18,903. Trading was canceled in the morning due to a Typhoon threat.
Flash estimates released by Markit Economics revealed that the purchasing managers' index for China came in at 49.5 in July, up from 48.2 in June, suggesting the slowest contraction in manufacturing activity in five months. The modest improvement came about due to a rebound in output. Europe
The major European markets have seen some volatility and are currently trading mixed. The French CAC 40 Index, the German DAX Index and the U.K.’s FTSE 100 Index are all lingering near the unchanged line.
Before the European markets opened, Moody’s lowered its outlook on its credit rating for Germany to negative from stable. The outlooks for the Netherlands and Luxembourg were also reduced. The action was premised on the likely financial sector shocks arising from a possible exit of Greece from the eurozone.
Meanwhile, debt offerings by Spain were fairly well received, although the cost of borrowing increased. Spain sold 3.05 billion euros worth of 3-month and 6-month Treasury bills compared to its 2-3 billion euro-target.
Flash estimates released by Markit Economics showed that its manufacturing purchasing managers’ index for the eurozone slid 1 point to 44.1 in July. On the other hand, the services index rose 0.5 points to 47.6.
In corporate news, Netherlands’ TomTom reported second quarter adjusted earnings of 9 euro cents per share compared to 10 euro cents per share last year, as revenues fell 17 percent to 262 million euros. The company maintained its 2012 guidance for adjusted earnings of 35 euro cents per share on revenues of 1.1 billion euros.
STMicroelectronics (STM) reported a second quarter loss of $235 million compared to a profit of $311 million in the year-ago period. Net revenues fell to $2.15 million from the year-ago quarter’s $2.55 billion.
SAP (SAP) reported second quarter basic earnings of 55 euro cents per share compared to 0.49 euro cents per share a year ago, while revenues rose 26 percent to $1.06 billion euros. For 2012, the company expects non-IFRS software and software-related service revenue growth of 10-12 percent and a non-IFRS operating profit of 5.05 billion euros to 5.25 billion euros.
Norwegian telecom company Telenor reported a 32 percent increase in its second quarter operating profit and also reaffirmed its full year guidance. The company also announced that it would buy back 46.8 million or 3 percent of its shares.
Netherlands’ KPN reported a 10 percent decline in its second quarter core profit but confirmed its 2012 core profit guidance for a 7-11 percent drop. The company also announced that it has decided to reduce its dividend by more than half.U.S. Economic Reports
The Federal House Finance Agency, or FHFA, is set to release its house price index for May at 10 am ET. The index is a weighted, repeat-sales index that measures average price changes of single-family houses in repeat sales or refinancings on the same properties. Economists expect a 0.3 percent increase by the house price index compared to a 0.8 percent increase in April.
The Richmond Federal Reserve’s manufacturing index due at 10 am ET is expected to come in at 0 for July compared to –3 in June.Stocks in Focus
Texas Instruments (TXN) reported second quarter earnings of 38 cents per share, including 6 cents per share in charges, on revenues of $3.34 billion. The company’s adjusted earnings beat estimates, while the revenues were just shy of estimates. For the third quarter, the company expects earnings of 34-42 cents per share on revenues of $3.21 billion to $3.47 billion. The company’s guidance was downbeat.
Health Management Associates (HMA) reported second quarter adjusted earnings from continuing operations of 21 cents per share, up 5 percent year-over-year. Net revenues jumped 20.2 percent to $1.472 billion. The earnings were in line, while the revenues missed expectations.
Baidu.com (BIDU) reported second quarter earnings of $1.24 per ADS, ahead of the $1.12 per ADS consensus estimate. Revenues rose 59.8 percent and also exceeded estimates. The company’s third quarter revenue guidance was also above estimates.
B/E Aerospace (BEAV) reported second quarter operating earnings growth of 33.1 percent to $142 million on revenues of $768.1 million. The company confirmed its 2012 guidance for earnings of $2.75 per share on revenues of $3 billion.
India’s Wipro (WIT) reported 24 percent growth in June quarter revenues and an 18 percent increase in its profits, while it also said it expects IT services revenues for the September quarter to come in at $1.52 billion-$1.55 billion.
Owens & Minor (OMI) reported second quarter earnings of 48 cents per share, up from 46 cents per share last year. Revenues rose 2.5 percent to $2.19 billion. The results trailed estimates. The company also announced that it has agreed to buy Movianto Group, which will provide the company an entry into the European healthcare market, for $158 million.
Crane (CR) said its third quarter adjusted earnings from continuing operations rose 13 percent to 96 cents per share on sales from continuing operations of $658 million. The earnings beat estimates, while revenues were shy of expectations. The company adjusted its 2012 guidance, with the revised earnings guidance surrounding the consensus estimate. Meanwhile, the company also announced an 8 percent increase in its quarterly dividend to 28 cents per share.
CTS Corp. (CTS) reported second quarter adjusted earnings that rose 29 percent to 18 cents per share on revenues of $154.3 million, up 5 percent year-over-year. The company lowered its full year sales growth guidance to 4-7 percent from 10-13 percent. However, citing savings expected from restructuring, the company maintained its adjusted earnings guidance at 75-80 cents per share.
AT&T (T) reported second quarter profit that improved from the previous year period and its earnings per share were above Wall Street view. However, total operating revenues were below the consensus estimate.
Biogen Idec’s (BIIB) second quarter profit improved from the year-ago period and its non-GAAP earnings per share were above Wall Street view. Total revenues surged from the year-ago period and also topped the consensus estimate. The company raised its non-GAAP earnings per share outlook for 2012, but lowered its GAAP earnings forecast.
Under Armour (UA) said its second quarter net income and net revenues increased from the year-ago period and surpassed analysts' expectations. The company also raised its net revenues and operating income for 2012.
Whirlpool (WHR) swung to a profit in its second quarter. However, revenues declined nearly 5 percent and were below the consensus estimate. Meanwhile, the company backed its 2012 earnings forecast.
UPS (UPS) said its second quarter profit and revenue increased from the same period last year but both were below Wall Street view. The company noted that customers are more concerned as greater uncertainty exists, as it look toward the second half of the year. The company lowered its earnings guidance for 2012.
Altera (ALTR), Apple (AAPL), Broadcom (BRCM), Compuware (CPWR), Edward Life Sciences (EW), Illumina (ILMN), Juniper Networks (JNPR), Linear Technology (LLTC), Netflix (NFLX), Norfolk Southern (NSC), Polycom (PLCM), RF Micro Device (RFMD), Unisys (UIS), Weatherford (WFT) and Websense (WBSN) are among the companies due to report their quarterly results after the markets close.