Small business lender CIT Group said Friday it was awaiting the outcome of a key bondholder vote that could ultimately push the troubled firm to file for bankruptcy.
Creditors have been wrestling over whether to approve a restructuring plan proposed by the New York City-based firm earlier this month that is aimed at clearing out $5.7 billion in debt.
Bondholders had to submit their final say as of Thursday evening. By Friday morning however, the company had no details on whether bondholders had accepted the offer.
The company said it had received more than 150,000 ballots and that once the final tally had been reached the company's board of directors would make a decision about its fate.
The company also provided no details on when the vote count would be completed. If the plan is rejected however, it is expected CIT would have to seek bankruptcy protection.
Shares of CIT (CIT, Fortune 500), which have been flirting with a $1 share price since its troubles first came to light during the summer, slipped 13% in mid-morning trading to about 80 cents.
Separately, the company revealed in a filing with the Securities and Exchange Commission Friday that it had struck an agreement with Goldman Sachs (GS, Fortune 500) to reduce the size of a $3 billion loan it had originally sought from the Wall Street firm in June when its troubles first emerged.
In exchange for getting Goldman to reduce the size of the loan by $875 million to $2.125 billion, CIT Group will have to pay a fee of $285 million.
Goldman Sachs would be due a payment of approximately $1 billion if CIT were to file for bankruptcy, according to reports
Friday, October 30, 2009
Monday, October 26, 2009
Dow back above 10,000
Stocks rallied early Monday, in a broad-based advance, as investors used last week's selloff as an opportunity to jump back into the market at a modestly lower level.
The Dow Jones industrial average (INDU) gained 92 points, or 0.9%, in the morning, after having gained as much as 100 points earlier. The S&P 500 (SPX) index rose 11 points, or 1%. The Nasdaq composite (COMP) rose 27 points, or 1.3%.
Investors appeared ready to get back in the market after a recent retreat. U.S. stocks ended last week lower, breaking a two-week run. Stocks ended lower Friday as the market couldn't sustain early gains driven by upbeat results from Microsoft (MSFT, Fortune 500) and Amazon.com (AMZN, Fortune 500), and a big rise in existing home sales.
"Maybe the feeling is that it was a bit overdone on Friday," said Philip Isherwood, equities strategist at Evolution Securities.
Given the lack of economic indicators on Monday, he said there was little reason to propel stocks upward, except as a reaction to the over-zealous sell-off at the end of last week.
Quarterly results: Dow component Verizon said profit tumbled 30% as higher costs countered an increase in revenue thanks to its strong wireless business. Nonetheless, earnings topped expectations. The company also reported higher quarterly revenue.
Just shy of 140 components of the S&P 500 are due to report quarterly results this week. With more than 40% of the S&P 500 having already reported, profits are currently on track to have fallen just over 18% from a year ago, according to Thomson Reuters.
So far, results have been soundly above forecasts, with 81% of companies topping expectations, 7% meeting and 12% missing.
Company news: Capmark Financial, one of the country's largest commercial real estate lenders, filed for bankruptcy protection Sunday, reflecting the major problems in the business property sector.
Dutch financial services firm ING (ING) said Monday it plans to spin off its insurance business and sell $11.3 billion of stock to pay back the government some of what it took in bailout money last year.
World markets: Global markets were mixed. In Europe, London's FTSE 100 gained 0.7%, France's CAC 40 lost 0.3% and Germany's DAX gave up 0.4%. Asian markets ended higher.
Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.48% from 3.42% late Thursday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro, after falling to a 14-month low earlier in the week. The dollar gained versus the yen.
U.S. light crude oil for December delivery rose 50 cents to $81 a barrel on the New York Mercantile Exchange, near a one-year high.
COMEX gold for December delivery rose $1.50 to $1,057.90 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.
The Dow Jones industrial average (INDU) gained 92 points, or 0.9%, in the morning, after having gained as much as 100 points earlier. The S&P 500 (SPX) index rose 11 points, or 1%. The Nasdaq composite (COMP) rose 27 points, or 1.3%.
Investors appeared ready to get back in the market after a recent retreat. U.S. stocks ended last week lower, breaking a two-week run. Stocks ended lower Friday as the market couldn't sustain early gains driven by upbeat results from Microsoft (MSFT, Fortune 500) and Amazon.com (AMZN, Fortune 500), and a big rise in existing home sales.
"Maybe the feeling is that it was a bit overdone on Friday," said Philip Isherwood, equities strategist at Evolution Securities.
Given the lack of economic indicators on Monday, he said there was little reason to propel stocks upward, except as a reaction to the over-zealous sell-off at the end of last week.
Quarterly results: Dow component Verizon said profit tumbled 30% as higher costs countered an increase in revenue thanks to its strong wireless business. Nonetheless, earnings topped expectations. The company also reported higher quarterly revenue.
Just shy of 140 components of the S&P 500 are due to report quarterly results this week. With more than 40% of the S&P 500 having already reported, profits are currently on track to have fallen just over 18% from a year ago, according to Thomson Reuters.
So far, results have been soundly above forecasts, with 81% of companies topping expectations, 7% meeting and 12% missing.
Company news: Capmark Financial, one of the country's largest commercial real estate lenders, filed for bankruptcy protection Sunday, reflecting the major problems in the business property sector.
Dutch financial services firm ING (ING) said Monday it plans to spin off its insurance business and sell $11.3 billion of stock to pay back the government some of what it took in bailout money last year.
World markets: Global markets were mixed. In Europe, London's FTSE 100 gained 0.7%, France's CAC 40 lost 0.3% and Germany's DAX gave up 0.4%. Asian markets ended higher.
Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.48% from 3.42% late Thursday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro, after falling to a 14-month low earlier in the week. The dollar gained versus the yen.
U.S. light crude oil for December delivery rose 50 cents to $81 a barrel on the New York Mercantile Exchange, near a one-year high.
COMEX gold for December delivery rose $1.50 to $1,057.90 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.
Tuesday, October 20, 2009
Stocks set for modest gains
U.S. stocks were set to open slightly higher Tuesday, supported by solid results from Apple and Texas Instruments and despite disappointing news about the housing market.
S&P 500, Nasdaq-100 and Dow Jones industrial average futures were higher.
Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.
The Dow reclaimed 10,000 on Monday, hitting its highest point in more than a year, driven by a weak dollar, higher commodity prices and earnings optimism.
Going forward, this puts a certain amount of pressure on stocks, since they've already made recent gains and investors have high expectations for the current corporate reporting period, said Peter Cardillo, chief market economist for Avalon Partners.
"The market has already priced in the good news on earnings and increased guidance, however the market is subject to some kind of a pullback purely on an overbought condition," said Cardillo, though he added that such declines would be small.
Company results: DuPont (DD, Fortune 500) reported third-quarter earnings of 45 cents per share, beating the consensus estimate of analysts surveyed by Thomson Reuters. But the Wilmington, Del.- based chemical maker missed on revenue, which fell 18% year-over-year to $6 billion. The company narrowed its full-year earnings guidance to a range of $1.95 to $2.05 per share, toward the high end of its previous forecast.
Pfizer (PFE, Fortune 500) reported third-quarter sales of $11.6 billion, a 3% decline from a year ago, beating expectations. The New York City-based drugmaker reported a 26% surge in earnings, to net income of $2.9 billion, or diluted earnings per share of 43 cents. Pfizer, which completed its acquisition of drugmaker Wyeth on Oct. 15, increased full-year guidance to a revenue range of $49 billion to $50 billion, and diluted EPS of $1.45 to $1.50.
Atlanta-based Coca-Cola (KO, Fortune 500) reported third-quarter earnings of 81 cents per share, down 1% from the prior year and matching expectations. Net revenues decreased 5% year-to-date to $8 billion, slipping below the forecast. Consolidated net income of $1.9 billion was flat, compared to the year-ago quarter.
Heavy equipment company Caterpillar (CAT, Fortune 500), based in Nashville, Tenn., reported third-quarter revenue of $7.3 billion, down 44% from the year-ago quarter, which was lower than expectations. Profit was $64 cents per share, down 75 cents EPS from the year-ago quarter, which the company blamed on "significantly lower" sales volume.
Caterpillar expects 2009 revenues of $32 billion to $33 billion and increased the profit range to $1.10 to $1.30 per share. In 2010, the company expects to increase revenues by 10% to 25% as dealers reduce the inventory pile-up that has impacted sales this year.
UnitedHealth (UNH, Fortune 500) reported an 8% increase in year-over-year revenue to $21.7 billion in the third quarter, as well as earnings of 89 cents per share.
Apple (AAPL, Fortune 500) posted stellar earnings after the closing bell Monday, thanks to a record surge in iPhone and Mac sales. Apple grew its PC market share to a 15-year high in the third quarter, despite the recession and an average selling price of more than $1,200. The company's stock hit a record high in after-hours trading.
0:00 /2:31Apple's most profitable quarter
Texas Instruments (TXN, Fortune 500), which also reported late Monday, posted earnings and sales that topped Wall Street's estimates, and raised its outlook.
Stocks have surged recently, buoyed by better-than-expected earnings reports. But some worry that the Dow's move above 10,000 could be a hoax and that investors should be more skeptical of the rally.
Economy: The government reported that housing starts slipped to the annual rate of 590,000 in September, from 598,000 the prior month. This fell short of the 610,000 rate forecast by a consensus of economists surveyed by Briefing.com.
Building permits fell to the annual rate of 573,000 in September from 579,000 in August. This fell short of the 595,000 expected by Briefing.com consensus.
The government also released its report on inflation at the wholesale level for September. The Producer Price Index slipped 0.6% in September, seasonally adjusted, following a rise of 1.7% in August. Without including food and energy prices, the core PPI edged down 0.1% in September, compared to an August rise of 0.2%.
World markets: Stocks in Asia rallied, with the Nikkei in Japan gaining nearly 1%. The mood was more subdued in Europe, where the major indexes were modestly higher in midday trading.
Money and oil: The dollar was flat against the euro, but lower versus the yen and the British pound. The price of oil slipped 5 cents to $79.56 a barrel after touching $80 for the first time in a year.
S&P 500, Nasdaq-100 and Dow Jones industrial average futures were higher.
Futures measure current index values against their perceived future performance and offer an indication of how markets may open when trading begins.
The Dow reclaimed 10,000 on Monday, hitting its highest point in more than a year, driven by a weak dollar, higher commodity prices and earnings optimism.
Going forward, this puts a certain amount of pressure on stocks, since they've already made recent gains and investors have high expectations for the current corporate reporting period, said Peter Cardillo, chief market economist for Avalon Partners.
"The market has already priced in the good news on earnings and increased guidance, however the market is subject to some kind of a pullback purely on an overbought condition," said Cardillo, though he added that such declines would be small.
Company results: DuPont (DD, Fortune 500) reported third-quarter earnings of 45 cents per share, beating the consensus estimate of analysts surveyed by Thomson Reuters. But the Wilmington, Del.- based chemical maker missed on revenue, which fell 18% year-over-year to $6 billion. The company narrowed its full-year earnings guidance to a range of $1.95 to $2.05 per share, toward the high end of its previous forecast.
Pfizer (PFE, Fortune 500) reported third-quarter sales of $11.6 billion, a 3% decline from a year ago, beating expectations. The New York City-based drugmaker reported a 26% surge in earnings, to net income of $2.9 billion, or diluted earnings per share of 43 cents. Pfizer, which completed its acquisition of drugmaker Wyeth on Oct. 15, increased full-year guidance to a revenue range of $49 billion to $50 billion, and diluted EPS of $1.45 to $1.50.
Atlanta-based Coca-Cola (KO, Fortune 500) reported third-quarter earnings of 81 cents per share, down 1% from the prior year and matching expectations. Net revenues decreased 5% year-to-date to $8 billion, slipping below the forecast. Consolidated net income of $1.9 billion was flat, compared to the year-ago quarter.
Heavy equipment company Caterpillar (CAT, Fortune 500), based in Nashville, Tenn., reported third-quarter revenue of $7.3 billion, down 44% from the year-ago quarter, which was lower than expectations. Profit was $64 cents per share, down 75 cents EPS from the year-ago quarter, which the company blamed on "significantly lower" sales volume.
Caterpillar expects 2009 revenues of $32 billion to $33 billion and increased the profit range to $1.10 to $1.30 per share. In 2010, the company expects to increase revenues by 10% to 25% as dealers reduce the inventory pile-up that has impacted sales this year.
UnitedHealth (UNH, Fortune 500) reported an 8% increase in year-over-year revenue to $21.7 billion in the third quarter, as well as earnings of 89 cents per share.
Apple (AAPL, Fortune 500) posted stellar earnings after the closing bell Monday, thanks to a record surge in iPhone and Mac sales. Apple grew its PC market share to a 15-year high in the third quarter, despite the recession and an average selling price of more than $1,200. The company's stock hit a record high in after-hours trading.
0:00 /2:31Apple's most profitable quarter
Texas Instruments (TXN, Fortune 500), which also reported late Monday, posted earnings and sales that topped Wall Street's estimates, and raised its outlook.
Stocks have surged recently, buoyed by better-than-expected earnings reports. But some worry that the Dow's move above 10,000 could be a hoax and that investors should be more skeptical of the rally.
Economy: The government reported that housing starts slipped to the annual rate of 590,000 in September, from 598,000 the prior month. This fell short of the 610,000 rate forecast by a consensus of economists surveyed by Briefing.com.
Building permits fell to the annual rate of 573,000 in September from 579,000 in August. This fell short of the 595,000 expected by Briefing.com consensus.
The government also released its report on inflation at the wholesale level for September. The Producer Price Index slipped 0.6% in September, seasonally adjusted, following a rise of 1.7% in August. Without including food and energy prices, the core PPI edged down 0.1% in September, compared to an August rise of 0.2%.
World markets: Stocks in Asia rallied, with the Nikkei in Japan gaining nearly 1%. The mood was more subdued in Europe, where the major indexes were modestly higher in midday trading.
Money and oil: The dollar was flat against the euro, but lower versus the yen and the British pound. The price of oil slipped 5 cents to $79.56 a barrel after touching $80 for the first time in a year.
Friday, October 16, 2009
Wall Street: Bye bye rally
Stocks tumbled Friday morning as disappointment about General Electric and Bank of America's financial results gave investors a reason to retreat after pushing the Dow to a one-year high in the previous session.
The Dow Jones industrial average (INDU) fell 112 points, or 1.1%, around 40 minutes into the session. The S&P 500 (SPX) index shed 14 points, or 1.3%, and the Nasdaq composite (COMP) dropped 28 points, or 1.3%.
The Dow ended Thursday's session at the highest point since Oct. 3, 2008, as higher oil prices propelled energy shares.
The stock market has essentially been on a tear since bottoming in March, with repeated calls for a big 10% to 15% selloff going unmet. Since hitting a more than 12-year low on March 9, the S&P 500 has gained 62% as of Thursday's close.
Company results: Bank of America (BAC, Fortune 500) reported a third-quarter loss of 26 cents per share, which was worse than the loss of 21 cents per share projected by a Thomson Reuters consensus of analysts.
Bank of America also fell behind expectations on revenue, reporting $26 billion for the third quarter, compared to the Thomson Reuters forecast of $27.6 billion. BofA shares fell almost 5%.
General Electric (GE, Fortune 500) reported earnings of 28 cents per share, which was higher than expected, and revenue of $37.8 billion, which was lower than forecast.
Analysts had expected GE to report third-quarter EPS of 20 cents and revenue of $39.5 billion. Investors were disappointed as most of the profit gains came from cost-cutting efforts. GE's stock slipped 5% in morning trading.
Google (GOOG, Fortune 500) reported results late Thursday that surpassed Wall Street's estimates and said that the worst of the recession is over. Shares gained 3% Friday.
Tech bellwether IBM (IBM, Fortune 500) also posted better-than-expected earnings Thursday. But shares tumbled Friday as investors expressed disappointment with its lower revenue.
World markets: Global markets were mixed. In Europe, London's FTSE 100 fell 0.3%, France's CAC 40 fell 0.9% and Germany's DAX lost 0.8%. Asian markets ended mixed, with the Hong Kong Hang Seng lower and the Japanese Nikkei lower.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.46% from 3.42% late Wednesday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro and the yen, turning positive after its recent across-the-board weakness versus a basket of currencies.
U.S. light crude oil for November delivery fell 19 cents to $77.39 a barrel on the New York Mercantile Exchange, after ending the previous session at the highest level in a year.
COMEX gold for December delivery fell $2.80 to $1,047.80 an ounce. Gold hit record highs repeatedly over the last week in response to a weak U.S. dollar and ongoing concerns about inflationary pressures.
The Dow Jones industrial average (INDU) fell 112 points, or 1.1%, around 40 minutes into the session. The S&P 500 (SPX) index shed 14 points, or 1.3%, and the Nasdaq composite (COMP) dropped 28 points, or 1.3%.
The Dow ended Thursday's session at the highest point since Oct. 3, 2008, as higher oil prices propelled energy shares.
The stock market has essentially been on a tear since bottoming in March, with repeated calls for a big 10% to 15% selloff going unmet. Since hitting a more than 12-year low on March 9, the S&P 500 has gained 62% as of Thursday's close.
Company results: Bank of America (BAC, Fortune 500) reported a third-quarter loss of 26 cents per share, which was worse than the loss of 21 cents per share projected by a Thomson Reuters consensus of analysts.
Bank of America also fell behind expectations on revenue, reporting $26 billion for the third quarter, compared to the Thomson Reuters forecast of $27.6 billion. BofA shares fell almost 5%.
General Electric (GE, Fortune 500) reported earnings of 28 cents per share, which was higher than expected, and revenue of $37.8 billion, which was lower than forecast.
Analysts had expected GE to report third-quarter EPS of 20 cents and revenue of $39.5 billion. Investors were disappointed as most of the profit gains came from cost-cutting efforts. GE's stock slipped 5% in morning trading.
Google (GOOG, Fortune 500) reported results late Thursday that surpassed Wall Street's estimates and said that the worst of the recession is over. Shares gained 3% Friday.
Tech bellwether IBM (IBM, Fortune 500) also posted better-than-expected earnings Thursday. But shares tumbled Friday as investors expressed disappointment with its lower revenue.
World markets: Global markets were mixed. In Europe, London's FTSE 100 fell 0.3%, France's CAC 40 fell 0.9% and Germany's DAX lost 0.8%. Asian markets ended mixed, with the Hong Kong Hang Seng lower and the Japanese Nikkei lower.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.46% from 3.42% late Wednesday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro and the yen, turning positive after its recent across-the-board weakness versus a basket of currencies.
U.S. light crude oil for November delivery fell 19 cents to $77.39 a barrel on the New York Mercantile Exchange, after ending the previous session at the highest level in a year.
COMEX gold for December delivery fell $2.80 to $1,047.80 an ounce. Gold hit record highs repeatedly over the last week in response to a weak U.S. dollar and ongoing concerns about inflationary pressures.
Tuesday, October 13, 2009
Stocks slip at start
Stocks fell at the start of trading Tuesday, as nervous traders braced for a wave of corporate earnings.
The S&P 500, Nasdaq-100 and Dow Jones industrial average slipped after the opening .
Before the bell, Manus Cranny, market analyst for MF Global in London, said the "decided lack of confidence in the London market this morning" stemmed from banking analyst Meredith Whitney, who downgraded Goldman Sachs (GS, Fortune 500) to "neutral" ahead of its third quarter earnings report, scheduled for Thursday.
"It could be an emotional and rocky third quarter both sides of the pond," wrote Cranny in a note to investors, adding that "U.K. banks are decidedly queasy on the back of the Goldman's downgrade."
Investors pushed the Dow Jones industrial average to a fresh one-year peak on Monday. The Dow gained 20 points, or 0.2%, leaving it about 114 points short of 10,000.
Companies: Before the open, Johnson & Johnson (JNJ, Fortune 500) reported a 5% decrease in third-quarter sales, to $15.1 billion, but an increase of 2% in earnings, to $1.20 per share. The producer of pharmaceuticals and household goods also raised its earnings guidance for the year, to a range of $4.54 to $4.59 per share.
Chipmaker Intel (INTC, Fortune 500) is slated to release its results after the closing bell.
AIG (AIG, Fortune 500) has reached a deal to sell its Taiwan life insurance unit for $2.2 billion.
Bank of America (BAC, Fortune 500) will reveal the legal advice it received related to its merger with Merrill Lynch, according to reports in The New York Times and Wall Street Journal.
World markets: Asian shares finished higher. Japan's Nikkei rose 0.6% while the Hang Seng in Hong Kong rallied 1.2%. Investors in Europe were more downbeat, with major indexes edging lower in midday trading.
Money and oil: The dollar fell versus major international currencies, including the euro, the yen and the pound.
The price of oil rose 72 cents to $73.99 a barrel.
The S&P 500, Nasdaq-100 and Dow Jones industrial average slipped after the opening .
Before the bell, Manus Cranny, market analyst for MF Global in London, said the "decided lack of confidence in the London market this morning" stemmed from banking analyst Meredith Whitney, who downgraded Goldman Sachs (GS, Fortune 500) to "neutral" ahead of its third quarter earnings report, scheduled for Thursday.
"It could be an emotional and rocky third quarter both sides of the pond," wrote Cranny in a note to investors, adding that "U.K. banks are decidedly queasy on the back of the Goldman's downgrade."
Investors pushed the Dow Jones industrial average to a fresh one-year peak on Monday. The Dow gained 20 points, or 0.2%, leaving it about 114 points short of 10,000.
Companies: Before the open, Johnson & Johnson (JNJ, Fortune 500) reported a 5% decrease in third-quarter sales, to $15.1 billion, but an increase of 2% in earnings, to $1.20 per share. The producer of pharmaceuticals and household goods also raised its earnings guidance for the year, to a range of $4.54 to $4.59 per share.
Chipmaker Intel (INTC, Fortune 500) is slated to release its results after the closing bell.
AIG (AIG, Fortune 500) has reached a deal to sell its Taiwan life insurance unit for $2.2 billion.
Bank of America (BAC, Fortune 500) will reveal the legal advice it received related to its merger with Merrill Lynch, according to reports in The New York Times and Wall Street Journal.
World markets: Asian shares finished higher. Japan's Nikkei rose 0.6% while the Hang Seng in Hong Kong rallied 1.2%. Investors in Europe were more downbeat, with major indexes edging lower in midday trading.
Money and oil: The dollar fell versus major international currencies, including the euro, the yen and the pound.
The price of oil rose 72 cents to $73.99 a barrel.
Monday, October 5, 2009
The 'sale-less' recovery
More and more economists are talking about how they think the economy actually grew in the third quarter. Unfortunately, it might be hard to find evidence of that once companies start reporting their latest quarterly results.
There's only a trickle of significant third- quarter reports due out this week, but investors will be keeping a close eye on them to see how Corporate America is faring during what might really be the waning days of this brutal recession.
Wall Street is hopeful that blue-chip companies will generate better-than-expected profits. If so, that could help rekindle some confidence in the economy after the disappointing September jobs report and get the market rally, which has stalled for the past two weeks, back on track.
But it's going to take more than good earnings news to get people excited. A parade of positive earnings surprises should only be considered encouraging if the better earnings are a result of increased consumer demand as opposed to more cost cutting (i.e. layoffs and reduced spending on new production).
At first blush though, sales aren't looking promising.
"Everybody thinks that earnings are going to be better than expected, but people still don't expect revenue growth for another six months. So we've got that tug-of-war going on," said Phil Dow, director of equity strategy with RBC Wealth Management in Minneapolis. "You're going to have decent sales growth from the technology, materials and energy sectors but that's probably going to be about it."
None of the major companies that will be announcing results this week are expected to report substantial revenue growth from the same period last year.
Fast-food chain kingpin Yum! Brands (YUM, Fortune 500) will release its numbers after the closing bell Tuesday. Analysts are forecasting a sales drop of 1.5% from a year ago.
Agricultural giant Monsanto (MON, Fortune 500) and retailer Costco (COST, Fortune 500) will both report numbers for their most recent quarter, which ended in August, on Wednesday morning. Analysts are predicting a 2% decline for Monsanto and 3% decline for Costco. Dow component Alcoa (AA, Fortune 500) is set to announce its third-quarter results on Wednesday afternoon and the consensus estimate is for a 38% drop in sales.
PepsiCo (PEP, Fortune 500) and Marriott (MAR, Fortune 500) are the only other two companies of note to report this week, with each of their results due out Thursday morning. Pepsi's sales are expected to be as flat as an opened can of soda left in the fridge for too long, with forecasts of a meager 0.1% increase in revenue. And analysts are predicting a nearly 20% decline in Marriott's sales.
0:00 /3:32Market on fire but not volatile
To be fair, it's unreasonable to expect a major surge in sales for companies. It's no secret that while many Wall Street traders, market strategists and other financial experts are tripping over themselves to declare that the recession is over, it doesn't feel that way for most consumers.
And since consumer spending is still the main growth engine of the economy, it will be nearly impossible for companies to generate sizeable increases in their top lines until consumers are willing to spend more freely.
"The economy has probably just reached a trough and we're still at the low end of the valley. So we are in a gray area," said Mike O'Rourke, chief market strategist with BTIG, an institutional brokerage firm in New York. "There will people complaining about the lack of revenue growth, but it's asking too much for big sales growth at this time."
O'Rourke added that because many companies have slashed their expenses in recent quarters, it won't take a huge increase in sales to have a meaningful impact on profits.
"We had massive layoffs and companies stopped investing in their businesses. I expect some type of revenue bump, but not a big one. But since companies cut to the bone, a little bump should help earnings nicely," he said.
That's a good point. But there's a flip side to it. Once you've cut to the bone, there's little, if anything, left to slice off. That means that, sooner or later, companies will need bigger increases in sales to lift their profits.
And the more that people talk about an economic recovery, the more demanding investors are going to become as well.
"Investors are going to be looking for evidence of sales improvement. Most importantly, they'll be looking at the guidance going forward," said John Stoltzfus, director and senior market strategist with Ticonderoga Securities in New York. "As the market develops more of this show-me-the-money attitude, investors are going to be less forgiving."
So the fact that sales don't appear to be picking up yet is troubling for several reasons. You could argue that companies should be able to have an easier time reporting sales growth in the third quarter because they are facing comparisons to a dismal period this time a year ago.
It shouldn't be too challenging to have a better quarter this year considering that the third quarter of 2008 was when we had to live through the meltdowns of Fannie Mae, Freddie Mac, Lehman Brothers and AIG.
But if companies can't report growth compared to one of the tumultuous economic periods in the nation's history, is it really safe to claim that a recovery is in full swing?
And with unemployment steadily rising, that's another reason to think that sales growth may not be in the cards just yet. What's more, times are getting tougher for people with jobs as well. The size of the weekly paycheck shrunk in September because employers continued to cut back on hours.
If these disturbing trends in the labor market continue, it may be a blue Christmas for retailers and investors.
"You need to see hours go up and actual job improvement for consumers to spend. It's hard to envision sales growth without that," Dow said.
Hopefully, companies will back up all the talk of an economic rebound by being more bullish about their sales outlook for the fourth quarter. If they aren't, it's worth wondering just how strong the recovery really is -- or if there is one at all.
There's only a trickle of significant third- quarter reports due out this week, but investors will be keeping a close eye on them to see how Corporate America is faring during what might really be the waning days of this brutal recession.
Wall Street is hopeful that blue-chip companies will generate better-than-expected profits. If so, that could help rekindle some confidence in the economy after the disappointing September jobs report and get the market rally, which has stalled for the past two weeks, back on track.
But it's going to take more than good earnings news to get people excited. A parade of positive earnings surprises should only be considered encouraging if the better earnings are a result of increased consumer demand as opposed to more cost cutting (i.e. layoffs and reduced spending on new production).
At first blush though, sales aren't looking promising.
"Everybody thinks that earnings are going to be better than expected, but people still don't expect revenue growth for another six months. So we've got that tug-of-war going on," said Phil Dow, director of equity strategy with RBC Wealth Management in Minneapolis. "You're going to have decent sales growth from the technology, materials and energy sectors but that's probably going to be about it."
None of the major companies that will be announcing results this week are expected to report substantial revenue growth from the same period last year.
Fast-food chain kingpin Yum! Brands (YUM, Fortune 500) will release its numbers after the closing bell Tuesday. Analysts are forecasting a sales drop of 1.5% from a year ago.
Agricultural giant Monsanto (MON, Fortune 500) and retailer Costco (COST, Fortune 500) will both report numbers for their most recent quarter, which ended in August, on Wednesday morning. Analysts are predicting a 2% decline for Monsanto and 3% decline for Costco. Dow component Alcoa (AA, Fortune 500) is set to announce its third-quarter results on Wednesday afternoon and the consensus estimate is for a 38% drop in sales.
PepsiCo (PEP, Fortune 500) and Marriott (MAR, Fortune 500) are the only other two companies of note to report this week, with each of their results due out Thursday morning. Pepsi's sales are expected to be as flat as an opened can of soda left in the fridge for too long, with forecasts of a meager 0.1% increase in revenue. And analysts are predicting a nearly 20% decline in Marriott's sales.
0:00 /3:32Market on fire but not volatile
To be fair, it's unreasonable to expect a major surge in sales for companies. It's no secret that while many Wall Street traders, market strategists and other financial experts are tripping over themselves to declare that the recession is over, it doesn't feel that way for most consumers.
And since consumer spending is still the main growth engine of the economy, it will be nearly impossible for companies to generate sizeable increases in their top lines until consumers are willing to spend more freely.
"The economy has probably just reached a trough and we're still at the low end of the valley. So we are in a gray area," said Mike O'Rourke, chief market strategist with BTIG, an institutional brokerage firm in New York. "There will people complaining about the lack of revenue growth, but it's asking too much for big sales growth at this time."
O'Rourke added that because many companies have slashed their expenses in recent quarters, it won't take a huge increase in sales to have a meaningful impact on profits.
"We had massive layoffs and companies stopped investing in their businesses. I expect some type of revenue bump, but not a big one. But since companies cut to the bone, a little bump should help earnings nicely," he said.
That's a good point. But there's a flip side to it. Once you've cut to the bone, there's little, if anything, left to slice off. That means that, sooner or later, companies will need bigger increases in sales to lift their profits.
And the more that people talk about an economic recovery, the more demanding investors are going to become as well.
"Investors are going to be looking for evidence of sales improvement. Most importantly, they'll be looking at the guidance going forward," said John Stoltzfus, director and senior market strategist with Ticonderoga Securities in New York. "As the market develops more of this show-me-the-money attitude, investors are going to be less forgiving."
So the fact that sales don't appear to be picking up yet is troubling for several reasons. You could argue that companies should be able to have an easier time reporting sales growth in the third quarter because they are facing comparisons to a dismal period this time a year ago.
It shouldn't be too challenging to have a better quarter this year considering that the third quarter of 2008 was when we had to live through the meltdowns of Fannie Mae, Freddie Mac, Lehman Brothers and AIG.
But if companies can't report growth compared to one of the tumultuous economic periods in the nation's history, is it really safe to claim that a recovery is in full swing?
And with unemployment steadily rising, that's another reason to think that sales growth may not be in the cards just yet. What's more, times are getting tougher for people with jobs as well. The size of the weekly paycheck shrunk in September because employers continued to cut back on hours.
If these disturbing trends in the labor market continue, it may be a blue Christmas for retailers and investors.
"You need to see hours go up and actual job improvement for consumers to spend. It's hard to envision sales growth without that," Dow said.
Hopefully, companies will back up all the talk of an economic rebound by being more bullish about their sales outlook for the fourth quarter. If they aren't, it's worth wondering just how strong the recovery really is -- or if there is one at all.
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