Markets & Finance

Movers: Bank of America, Morgan Stanley, Royal Bank of Scotland, AMD


Stocks in the news Tuesday

From Standard & Poor's Equity ResearchBank of America (BAC) posts $0.15, vs. $0.82 a year ago, third quarter EPS, driven by significant increase in provision expense, as credit costs continued to rise, partially offset by advances in various income categories largely as a result of Countrywide Financial acquisition and LaSalle Bank. Revenue net of interest expense rose 21% to $19.9 billion. It reduces quarterly dividend by 50% to $0.32. Commences public offering of about $10B of common stock. The two capital raise initiatives target an 8% Tier 1 capital ratio. S&P downgrades to hold from buy.

Royal Bank of Scotland Group PLC (RBS) - S&P MarketScope Europe reports that a report by the BBC suggests the UK's three largest banks, RBS, Lloyds TSB (LYG) and Barclays (BCS), estimate they need GBP 15 billion each, with GBP 7.5 billion paid up front and a further GBP 7.5 billion guarantee by the Treasury. Yesterday, S&P Ratings Services lowered long- and short-term counterparty credit ratings for RBS to 'A+/A-1' from 'AA-/A-1+'. Also cut its long-term counterparty credit ratings on main rated subsidiaries to 'AA-' from 'AA'.

Morgan Stanley (MS) shares pare losses on report that deal with Mitsubishi (MTU), whereby MTU will invest $9 billion in MS for 21% interest in firm, is on track to close this weekend.

Advanced Micro Devices (AMD) and Advanced Technology Investment Co. (ATIC) of Abu Dhabi create semiconductor manufacturing company to address the growing demand for independent, leading-edge foundry production capabilities. The new company will be temporarily be called "The Foundry Co." Mubadala Development Co. will increase its current investment in AMD to 19.3% on fully diluted basis. AMD will contribute to The Foundry Co. its manufacturing facilities, related assets, intellectual property rights. ATIC will invest $2.1 billion to purchase its stake in The Foundry Co.

SAP AG (SAP) shares continue to be under pressure following yesterday's announcement that SAP expects U.S. GAAP software and software-related service revenues to rise 13%-14% in third quarter; said market developments of the past several weeks have been dramatic and worrying to many businesses and these concerns triggered a very sudden and unexpected drop in business activity at the end of third quarter.

Auto stocks fall amid reports that General Motors (GM) is planning on halting output at its Opel Plant in Poland for nearly 3 weeks due to declining orders from Western Europe.

Safeway (SWY) gains 1.39 to 23.16 after the company posts $0.46, vs. $0.44 a year ago, third quarter EPS on 2.8% same-store sales rise including fuel, 0.5% rise excluding fuel, 3.9% total sales rise. Confirms guidance for $2.25-$2.35 2008 EPS. S&P reiterates buy.

Casino stocks fall after Deutsche Bank cuts price targets on Ameristar Casinos (ASCA), Bally Technologies (BYI), International Game Technology (IGT), WMS Industries (WMS), Boyd Gaming (BYD), Isle of Capri Casinos (ISLE), Las Vegas Sands (LVS), Melco Crown Entertainment (MPEL), MGM Mirage (MGM), Pinnacle Entertainment (PNK), Wynn Resorts (WYNN).

Google (GOOG) falls 19.54 to 351.67 after Stifel lowers estimates and price target on GOOG. Stifel believes advertising budgets are likely to be reassessed; it reiterates buy.

Advance Auto Parts (AAP) posts 2.6% increase in third quarter sales, flat comp store sales. Says lower-than-expected sales growth will constrain EPS in third quarter.

Acuity Brands (AYI) posts $1.02, vs. $0.97 a year ago, fourth quarter EPS as fewer shares outstanding offset 3% lower sales. To accelerate its ongoing programs to streamline operations, including the consolidation of certain mfg facilities, workforce reduction. As a result of these actions, plans to take a special charge of about $17 million in first quarter of fiscal year 2009.

Peco II (PIII) retains Western Reserve partners to explore alternatives to enhance shareholder value, including, but not limited to, opportunities to acquire, merge with or sell to similar U.S. or foreign businesses.

Anadarko Petroleum (APC) says it ended September with a cash balance of about $1.9 billion. In addition, it expects to close previously announced divestiture of Peregrino field offshore Brazil by year end, apply the net after-tax proceed to additional debt reduction. APC anticipates meeting its year-end debt-to-cap levels, using its free cash flow above capital spending to repurchase additional shares in 2009.

Western Sizzlin (WEST) says it plans to commence an exchange offer for up to 680,000 shares of Jack In The Box (JBX), or about 1.2% of JBX shares outstanding. The proposed exchange ratio for the offer is 1.607 WEST common shares per JBX common share. JBX responds to WEST's announcement by saying it has no additional information on this unsolicited exchange offer and will have no further comment on this matter until WEST files Form S-4 with the SEC.

Sonus Networks (SONS) says it expects to report a significant decrease in third quarter revenue, and further expects that revenue for 2008 will decrease. Says its business experienced weakness toward the end of the quarter due to several factors including the challenging environment. SONS adds it expect this to continue for the foreseeable future.

Barclays downgrades IBM (IBM) to equal-weight from overweight.

Fred's (FRED) posts 1.1% higher September same-store sales and flat total sales. Considering the current pressures on its customers, expects to see increased transaction growth near term in lower-margin departments; as a result, cuts third quarter EPS forecast to $0.14- $0.16.

Wavecom S.A. (WVCM), in response to Gemalto's Oct. 6 bid for the company, says the offer was neither encouraged, endorsed nor discussed with WVCM and therefore considered hostile.

Genentech (DNA) and Biogen Idec (BIIB) report Phase III study of Rituxan in combination with fludarabine and cyclophosphamide chemotherapy met its primary endpoint of improving progression-free survival, as assessed by investigators, in patients with previously treated CD20-positive chronic lymphocytic leukemia compared to chemotherapy alone.

Hartford Financial Services Group (HIG) - S&P Ratings Services revises outlook on HIG to negative from stable. Affirms 'A' counterparty credit rating on HIG and its 'AA' counterparty credit, financial strength ratings on all HIG's core insurance op. units. Negative outlook reflects HIG's reduced financial flexibility because of the increase in leverage and related material reduction in fixed-charge coverage levels resulting from Allianz SE investment and expected softening of its operating performance. A.M. Best places rating under review with neg. implications.

Haverty Furniture Companies (HVT) posts 15% lower third quarter same-store sales, 13% lower total sales. Notes total written business down over 15% for third quarter vs. 5.8% a year ago.

TRW Automotive Holdings (TRW) announces the withdrawal of its 2008 sales and earnings guidance provided on July 31, 2008. Expects a net loss for third quarter on lower than anticipated sales, significantly higher restructuring expenses and increased commodity costs.

Regis (RGS) posts 1.6% lower same-store sales, 1.9% higher total revenue. Comps were below previous guidance of -1% to +1%. Now sees first quarter operational EPS near or slightly below the low end of previously issued guidance of $0.41-$0.47. Sees fiscal year 2009 same-store sales ranging from -1.0% to +1.0%, EPS of $1.77-$2.03.

F5 Networks (FFIV) sees fourth quarter revenue of $171.3 million, below its $172-$174 million guidance, but it expects to meet or exceed its GAAP and non-GAAP EPS targets. Notes demand for BIG-IP 3600 was much stronger than company initially anticipated.

Landry's Restaurants (LNY) says it been informed by Tilman Fertitta, company's Chairman, President and CEO, that in view of closure of the company's Kemah and Galveston properties, instability in credit markets and deterioration in casual dining and gaming industries, the debt financing required to complete pending merger transaction is in jeopardy at current $21/share price. Notes Fertitta has further advised that he's in negotiations with Jefferies and Co. about the financing for a transaction at a substantially reduced price.


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