Markets & Finance

Movers: Merrill Lynch, Freddie Mac, Fannie Mae, Visa, Morgan Stanley, Adobe Systems


Stocks in the headlines on Wednesday

From Standard & Poor's Equity ResearchMerrill Lynch (MER) falls 4.32 to 42.31 on news a Merrill unit sued XL Capital, a unit of bond insurer Security Capital Assurance, alleging the company is attempting to avoid its financial obligations of up to $3.1 billion under seven credit default swaps.

The Office of Federal Housing Enterprise Oversight eased capital requirements for Fannie Mae (FNM) and Freddie Mac (FRE), allowing them to pump up to $200 billion into the U.S. mortgage market. The regulator said it was lowering to 20% from 30% the amount of extra capital the companies had been required to hold after their accounting irregularities, and will consider further reductions.

Visa (V) closes around 56.50, after reaching a high of 69, on its first day of trading. Its IPO was priced at 44, above the expected range of 37-42. The world's largest credit card network sold 406 million class A shares, making this the largest IPO in history.

Morgan Stanley (MS) posts better-than-expected $1.45, vs. $2.17 a year ago, first quarter EPS from continuing operations on 17% drop in consolidated revenue.

Adobe Systems (ADBE) posts $0.48, vs. $0.30 a year ago, first quarter non-GAAP EPS on 37% revenue rise. Says its first quarter non-GAAP EPS target range was $0.44-$0.46. Sees second quarter revenue of $855-$885 million, non-GAAP operating margin of approximately 39%, EPS of $0.45-$0.47. Reaffirms fiscal year 2008 revenue growth target of about 13%, non-GAAP EPS of $1.86-$1.92.

Ericsson (ERIC) falls 1.83 to 17.56 after the company's mobile-phone venture with Sony (SNE), Sony-Ericsson, warned of a first quarter sales shortfall due to slower growth in European markets.

Thornburg Mortgage (TMA) is down 1.19 to 1.79 after it reaches an agreement with a number of its lenders to restructure its obligations and reduce its future margin-call exposure. S&P reiterates hold.

3Com (COMS) schedules a shareholder vote on the existing terms of its pending sale to Bain Capital Partners. S&P thinks the share-price volatility reflects the failure to come to new terms that would be more likely to receive government approval. Maintains hold.

Discover Financial Services (DFS) posts $0.50, vs. $0.54 a year ago, first quarter EPS from continuing operations on higher loan loss provisions, higher interest expense. S&P reduces target, maintains hold.

Capital Corp. of the West (CCOW) falls 4.96 to 5.70 on news it delays filing its Annual Report on Form 10-K for 2007. It says it determined that certain of its loans required an adverse classification, substantially greater provision for possible loan losses, primarily due to rapid decline in real estate values in California's Central Valley in the fourth quarter 2007. Says it had material weaknesses in its credit/lending and accounting functions.

SI International (SINT) is down 5.06 to 19.44. It cuts first quarter EPS guidance to $0.24-$0.27 on revenue of $128-$130 million from previous guidance of $0.31-$0.35 on revenue of $133-$141 million. Notes program delays in the funding and start of several new key programs. It now sees 2008 EPS of $1.40- on revenue of $560-$580 million.

Monster Worldwide (MNST) expects total non-GAAP operating expenses for first quarter to be in the range of $327-$333 million, above current market view, reflecting "significant" global branding initiatives and the normal seasonality of compensation-related costs for the company's global work force. JP Morgan reportedly downgrades to neutral from outperform.

General Mills (GIS) posts $0.87, vs. $0.74 a year ago, third quarter EPS (excluding items) on 12% revenue rise. It sees $3.45 fiscal year 2008 EPS (excluding items).

Ross Stores (ROST) posts $0.70, vs. $0.66 a year ago, fourth quarter EPS on 2% higher same-store sales, 3% higher total sales.

Charming Shoppes (CHRS) posts $0.20 fourth quarter non-GAAP loss (excluding items), vs. $0.19 EPS a year ago, on 9% lower same-store sales, 10% lower total sales. Sees $0.06-$0.08 first quarter loss, $720-$730 million sales. For fiscal year 2009, it is planning a 50% reduction in the number of store openings vs. fiscal year 2008.

Darden Restaurants (DRI) posts $0.80, vs. $0.79 a year ago, third quarter EPS from continuing operations on 25% revenue rise. Says integration costs and purchase accounting adjustments related to the acquisition of RARE Hospitality reduced EPS by about $0.05. Consensus estimate was $0.82.

Campbell Soup (CPB) says it has completed the sale of its Godiva Chocolatier business to Yildiz Holding A.S. for $850 million. Also says its board authorized using about $600 million of the net proceeds of the sale of Godiva to purchase CPB stock in open market transactions. Following the divestiture of Godiva business, CPB expects its continuing operations to deliver fiscal year 2008 sales growth in excess of its long-term target range of between 3%-4%. Campbell expects to deliver EBIT growth from operations between 5 %-7% from fiscal 2007 adjusted base of $1.2 billion.

Amerigroup (AGP) cuts $2.58-$2.73 2008 EPS guidance to $2.46-$2.61 to reflect yesterday's Federal Reserve action reducing the Federal Funds Rate by 75 basis points.

Inverness Medical Innovations (IMA) says as part of its continuing efforts to streamline its worldwide operations for the purpose of lowering operating costs and improving margins, announces plans to close two facilities in the San Francisco area that house its Cholestech and HemoSense operations, and a manufacturing plant in Louisville, Colorado, which produces its BioStar OIA product lines.

Focus Media Holdings Ltd. (FMCN) posts $0.34 fourth quarter earnings per ADS on sharp revenue rise. Says non-GAAP EPADS of $0.52 exceeded co. guidance. Sees first quarter revenue of $160-$165 million and 2008 revenue of $900-$930 million, non-GAAP EPADS of $2.06-$2.11. Needham raises estimates; reiterates buy.

Labarge (LB) sees $0.23-$0.24 third quarter EPS on sales of $70-$72 million, which would significantly exceed the current year's second quarter and year-ago's third quarter results. Also stated it expects fourth quarter sales, EPS to be at least as strong as third quarter results.

TD Ameritrade Holdings (AMTD) posts February monthly activity, including 284,000 client trades per day in February 2008, up 8% from February 2007 and down 18% from January 2008. Says it had about $310 billion in total client assets as of Feb. 29, up 11% from February 2007 and up 8% from January 2008, and average fee-based investment balances amounted to $77.3 billion, up 61% from February 2007 and up 32% from January 2008.


Steve Ballmer, Power Forward
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