Markets & Finance

Movers: WaMu, Morgan Stanley, AIG, Goldman Sachs, SanDisk, Nortel


Stocks in the news Wednesday

From Standard & Poor's Equity ResearchWashington Mutual (WM) falls 0.31 to 2.01. The New York Times reports that WaMu has hired Goldman Sachs to look for buyers. Among the potential bidders that Goldman has talked to are Wells Fargo (WFC), JPMorgan Chase (JPM) and HSBC (HBC) -- but no buyers may materialize, says the Times. Earlier, S&P said it believes regulators may be concerned that WM's recent negative publicity will lead to depositors withdrawing funds from the bank. S&P shares these concerns, but at current levels thinks WM be attractive to potential suitors; it keeps hold opinion.

Morgan Stanley (MS) falls Down 7.22 to 21.48. Morgan Stanley is considering a merger with Wachovia (WB), reports The New York Times. In a memo reportedly released by MS, CEO Mack says "short sellers are driving our stock down." In response to today's share price weakness, S&P equity analyst Matthew Albrecht believes MS and GS are under pressure because market believes these firms cannot remain independent. Still cautious on MS shares due to severe market disruption, numerous uncertainties. Keeps hold opinion on MS. The company, announcing third quarter results ahead of schedule, posts better-than-expected $1.32, vs. $1.38 a year ago, third quarter EPS on 1.0% revenue rise. Notes non-interest expense rose 7%. Street was looking for $0.77.

American International Group (AIG) drops 1.53 to 2.22 after it gets a rescue plan from the government. The Federal Reserve Bank of New York is providing a 2-year, $85 billion secured revolving credit facility to AIG that will ensure the company can meet its liquidity needs. AIG will cede 79.9% of shareholders' equity to the Fed. S&P maintains sell, while Citigroup keeps hold and cuts target to $4.50 from $14.

Goldman Sachs (GS) drops 13.26 to 119.75. Oppenheimer cuts estimates on GS, maintains perform as it remains cautious on brokers as they battle. Yesterday GS posted $1.81 vs. $6.13 third quarter EPS on 43% total revenue drop.

Nortel Networks (NT) says with a sustained and expanding economic downturn, it is experiencing significant pressure as carrier customers cut back their capex further than previously expected, other customers are deferring investments. As a result, now expects third quarter revenues of about $2.3 billion. Also expects 2008 revenue to decline 2%-4% vs. year ago, sees gross margin of about 42% of revenue.

SanDisk (SNDK) announces that its Board of Directors have rejected an unsolicited, non-binding proposal from Samsung Electronics Co., Ltd to acquire SNDK for $26 per share cash. Board concluded that proposal "significantly undervalues SanDisk given the long-term prospects of its business."

Barclays PLC (BCS) says it has agreed, subject to U.S. Court and relevant regulatory approvals, to acquire Lehman Brothers (LEH) North American investment banking and capital markets operations and supporting infrastructure for a cash consideration of $250 million; BCS will also acquire the New York headquarters of LEH as well as its two data centers at close to their current market value.

General Electric (GE) falls 1.85 to 23.21. JP Morgan sees potential for another year of material decline at GE Capital, a headwind for earnings growth at GE; it cuts estimates.

Georgia Gulf (GGC) suspends it quarterly cash dividend due to the impact of continued weak economic conditions, particularly the U.S. housing market.

Longs Drug Stores (LDG) says it has determined not to furnish information to, nor have talks and negotiations with, Walgreens (WAG), which recently offered to buy LDG at $75.00 per share. LDG continues to recommend its holders accept the tender offer by CVS Caremark (CVS).

Lloyds TSB Group PLC (LYG) - According to RNS, the company news service from the London Stock Exchange, HBOS PLC has confirmed that it is in advanced talks with Lloyds which may or may not lead to an offer being made for HBOS. A further announcement will be made when appropriate. According to report on website www.Telegraph.co.uk, HSBC is also interested in a potential takeover but is unwilling to pay anything for HBOS shares. LYG is unlikely to pay any more than euro 2 per share, the Telegraph wrote.

Adobe Systems (ADBE) posts $0.35, vs. $0.34 a year ago, third quarter GAAP EPS on $887.3 million revenue, a 4.2% year-over-year rise and above the company's $855-$885 million forecast. Non-GAAP EPS was $0.50, vs. Street's estimate of $0.46. Sees fourth quarter revenue of $925-$955 million, operating margin of about 30.5% on a GAAP basis (39.5% on non-GAAP basis), $0.51-$0.53 non-GAAP EPS.

General Mills (GIS) posts $0.96 (excluding item), vs. $0.81 a year ago, first quarter EPS on 14% sales rise. Current quarter excludes a reduction related to mark-to-market valuation of certain commodity positions. Sees fiscal year 2009 sales growth at a mid single-digit rate. Revises fiscal year 2009 EPS guidance to $3.81-$3.85 (excluding item) vs. earlier $3.78-$3.83 forecast.

Verasun Energy (VSE) says in a regulatory filing that it expects third quarter loss of $0.40-$0.65 per share due to sharp drop in corn prices. Separately, says it has commenced a 20 million share offering.

Allegheny Technologies (ATI) announces strategic investment in its transformation of its Flat-Rolled Products segment. The project is estimated to cost about $1.16 billion and take four years to complete. ATI expects the return on this investment to be more than 20% by 2014, including an estimated annual cost reduction of $120 million. As a result of this investment, ATI's annual capex is likely to remain in the range of $500-$600 million for 2009 through 2012.

Polyone (POL) now sees second half consolidated sales growth of 8%-10%, below previous expectation of 15% sales growth. The company cites weakened European demand, weakening of the Euro, demand and pricing trends in North American housing and automotive markets more challenging than expected. POL also announced it temporarily shut down production at 2 of its facilities in Texas as a direct result of Hurricane Ike.


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