Wall Street Breakfast: Must-Know News

• IEA sees crude crunch. "The world's premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand." Previously, the IEA had forecast crude-and-equivalents supply rising to 116M barrels/day by 2030, up from a present 87M -- enough to meet demand forecasts. Now it is worried companies may struggle to hit 100M. "The oil investments required may be much, much higher than what people assume," IEA chief economist Fatih Birol says. "This is a dangerous situation." That, coupled with a 5.32M drop in U.S. inventories to 320.4M, saw oil top $135 in overnight trading. It's up 19% over the past month.
• BCE buyout stymied; could be biggest-ever deal to collapse. The Quebec Court of Appeal issued a surprise ruling allowing bondholders to challenge BCE's (BCE) $52.9B leveraged buyout because the company failed to consider their interests. Bondholders say the acquisition increases BCE's risk of debt default."The decision effectively terminates the proposed transaction," a lawyer for the bondholders says. The ruling comes amid reports the financing banks were trying to renegotiate terms. BCE and its buyers (Ontario Teachers' Pension Plan, Providence, and Merrill Lynch's (MER) private-equity arm) said they will seek leave to appeal to the Supreme Court of Quebec.
• UBS struggles to sell itself. UBS (UBS) revealed the pricing of its recent $15.5B rights issue: Investors received shares at a 31% discount to yesterday's close. Apparently UBS's offering failed to entice buyers; the price is considered an embarrassment for the firm. UBS also finalized its $15B debt sale to BlackRock (BLK) yesterday. Shares have gained 11% since the rights issue was announced on Apr. 1.
• NRG confirms Calpine bid. NRG Energy (NRG) made an unsolicited $9.6B offer for Calpine (CPN), a deal that would make it the #1 independent power company in the U.S. The all-stock offer of 0.534 share per Calpine share is a 6.7% premium. "Calpine is an almost pure play on gas-fired generation, so their carbon footprint would be attractive," as companies seek to limit their carbon-dioxide emissions, Calyon analyst Gordon Howald says. "It would be unparalleled. There is nothing like this in the competitive power generation industry," NRG CEO David Crane said. "It's really the ideal that people have talked about from time to time."
• AMR dives on dismal outlook. Shares of American Air parent AMR Corp. (AMR) plummeted 24.15% Wednesday after it announced significant reductions to its 2008 domestic flight schedule and outlined plans to retire at least 75 aircraft -- a response to record fuel prices, economic softness, and a difficult competitive environment. "The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak U.S. economy," CEO Gerard Arpey said. American yesterday introduced a $15 fee for the first checked bag.
• Fed likely to stay put. Minutes from the April 29-30 FOMC meeting revealed the Fed's decision to cut its target rate to 2% was a "close call" and that it would be reluctant to cut rates further, even in the face of continuing economic weakness. "The risks to growth were now thought to be more closely balanced by the risks to inflation. Accordingly, the Committee felt that it was no longer appropriate for the statement to emphasize the downside risks to growth," the minutes said.
• AIG under attack. The Jacksonville Police and Fire Pension Fund is suing American International Group (AIG) along with several of its executives for inflating its share price by understating its exposure to subprime mortgage losses. The lawsuit alleges AIG's Q1 loss of $7.8B shocked investors after the firm assured them any losses on credit insurance would be limited.
• AstraZeneca sued over drug marketing. The Arkansas AG is suing AstraZeneca (AZN) for falsely claiming its antipsychotic medicine Seroquel was safer than less-expensive drugs, and failing to warn patients of its risks. Seroquel produced over $4B in sales in 2007, second to Nexium among AZN's top sellers.
• Worse than smoking? Pfizer's (PFE) anti-smoking drug Chantix has been linked to more than 3,000 reports of serious side-effects including suicide and heart trouble, a new study says. The FAA Wednesday banned the pill for its pilots. "These data provide a strong signal that the risks have been underestimated, and show that a wide spectrum of serious injuries are being reported in large numbers," the nonprofit Institute for Safe Medication Practices said in its report.

Earnings: Wednesday After Close

• CITI Trends (CTRN): Q1 EPS of $0.36 beats consensus of $0.34. Revenue of $121M (+13.5%) in line. Comps +0.3%. Sees 2008 EPS of $1.10-1.15, short of consensus of $1.14 and full-year comps +2-3%.
• Computer Sciences (CSC): FQ4 EPS of $1.44 beats consensus of $1.40. Revenue of $4.48B (+10.9%) vs. consensus $4.43B. Sees 2009 EPS of $4.20-4.40 in-line.
• Gymboree (GYMB): Q1 EPS of $0.86 beats consensus of $0.84. Revenue of $242M (+15.7%) in-line. Sees Q2 EPS of $0.18-0.20, short of consensus of $0.21. Sees 2008 EPS of $3.10-3.15 in-line.
• Hot Topic (HOTT): Q1 EPS of -$0.03 beats consensus of -$0.04. Revenue of $159M (+1.1%) in-line. Sees Q2 EPS of -$0.02 to -$0.04 in-line.
• Jackson Hewitt (JTX): Says it prepared 3.45M tax returns in 2008, -5.3%. Sees full-year EPS of $1.34-1.39, short of previous guidance of $1.48-1.60, vs. consensus of $1.51. Sees full-year revenue of $282-292M vs. consensus of $278M.
• Limited (LTD): Q1 EPS of $0.11 beats consensus of $0.08. Revenue of $1.925B (-16.7%) in-line. Sees Q2 EPS of $0.16-0.20 in-line. Sees full-year EPS of $1.38-1.58, better than consensus of $1.41.
• Longs Drug Stores (LDG): Q1 EPS of $0.63 beats consensus of $0.60. Revenue of $1.41B (+8.5%) in-line. Sees full-year revenue +5-7% (= $5.5-6B vs. 5.53B consensus).
• Napster (NAPS): FQ4 EPS of -$0.10 beats consensus of -$0.13. Revenue of $30.8M in-line.
• NetApp (NTAP): FQ4 EPS of $0.38 beats consensus of $0.36. Revenue of $938M (+17.1%) in-line. Sees FQ1 EPS of $0.20-0.23, short of consensus of $0.27, and revenue of $845-875M vs. consensus of $871M. Sees 2009 EPS of $1.40-1.46 in-line.
• Netease.com (NTES): Q1 EPS of $0.30 misses consensus of $0.31. Revenue of $93M vs. consensus of $82M.
• Nordson (NDSN): FQ2 EPS of $0.97 beats consensus of $0.83. Revenue of $294M (+21.9%) vs. consensus of $280M. Sees Q3 EPS of $0.91-1.01, better than vs. consensus of $0.88.
• Perry Ellis (PERY): Q1 EPS of $0.60 beats consensus of $0.55. Revenue of $243.5M (+6.4%) vs. consensus of $234M. Sees full-year EPS of $1.95-$2.00, short of consensus of $1.99, and revenue of $910-925M vs. consensus of $922M.
• PetSmart (PETM): Q1 EPS of $0.32 just beats consensus of $0.31. Revenue of $1.20B (+9.1%) in-line. Comps +2.9%. Sees Q2 EPS of $0.26-0.30, short of consensus of $0.34, and comps growth in the low-single digits. Sees 2008 EPS of $1.51-1.59, better than consensus of $1.51.
• Salesforce.com (CRM): Q1 EPS of $0.08 beats consensus of $0.07. Revenue of $248M (+52.5%) vs. consensus of $236M. Net paying customers +2,600 to 43,600. Sees Q2 EPS of $0.07-0.08 in-line, and revenue of $258-259M vs. consensus of $251M. Raises full-year revenue guidance to $1.065B from $1.06B, vs. consensus of $1.05B.
• Semtech (SMTC): Q1 EPS of $0.22 beats consensus of $0.20. Revenue of $74.4M (+22.9%) vs. consensus of $72M. Sees Q2 EPS of $0.23-0.24, better than consensus of $0.22.
• Synopsys (SNPS): FQ2 EPS of $0.41 beats consensus of $0.38. Revenue of $325M (+10.8%) vs. consensus $321M. Sees FQ3 EPS of $0.38-0.40 in-line and revenue of $335-343M vs. consensus of $330M.

Earnings: Thursday Before Open

• Ann Taylor (ANN): Q1 EPS of $0.47 beats consensus of $0.46. Revenue of $592M in-line. Comps -4.3%. Sees Q2 EPS of $0.42-0.47, short of consensus of $0.47. Sees 2008 EPS of $1.80-1.90, short of consensus of $1.88. Sees 2008 comps slightly negative.
• Barnes & Noble (BKS): Q1 EPS of $0.04 misses consensus of $0.05. Revenue of $1.2B in-line. Full-year EPS of $1.70-1.90 in-line.
• Bon-Ton Stores (BONT): Q1 EPS of -$2.03 beats consensus of -$2.25. Revenue of $700M vs. consensus of $715M. Sees full-year EPS of $0.00-0.30, better than consensus of -$0.35.
• The Buckle (BKE): Q1 EPS of $0.61 beats consensus of $0.57. Revenue of $160M vs. consensus of $155M. Comps +25.6%.
• Casual Male Retail (CMRG): Q1 EPS of -$0.01 misses consensus of $0.02. Revenue of $107.6M vs. consensus of $110.15M. Sees 2008 EPS of $0.25-0.30, better than consensus of $0.24.
• Cato (CTR): Q1 EPS of $0.58 misses consensus of $0.60. Revenue of $229M in-line. Comps -2%. Sees Q2 EPS of $0.28-$0.33, better than consensus of $0.24. Sees 2008 EPS of $0.80-0.95, in-line.
• Dicks Sporting (DKS): Q1 EPS of $0.18 in-line. Revenue of $912M vs. consensus $926M. Sees Q2 EPS of $0.34-0.38, short of consensus $0.43. Comps are expected to decrease 4-7%.
• Flowers Foods (FLO): Q1 EPS of $0.39 beats consensus of $0.35. Revenue of $677M vs. consensus of $666.5M. Raises full-year EPS outlook to $1.15-$1.23 from $1.07-$.17, vs. consensus of $1.14.
• Frontline (FRO): Q1 EPS of $2.50 beats consensus of $2.38. Revenue of $393.5M (+44.1%) in-line.
• GameStop (GME): Q1 EPS of $0.37 beats consensus of $0.35. Revenue of $1.81B vs. consensus of $1.72B. Sees Q2 EPS of $0.26-0.28 vs. consensus of $0.26. Sees Q2 comps up 12-14%.
• Hormel Foods (HR): FQ2 EPS of $0.56 just beats consensus of $0.55. Revenue of $1.59B in-line. Sees full-year EPS of $2.30-2.40, short of consensus $2.37.
• Mentor Graphics (MENT): Q1 EPS of -$0.10 in-line. Revenue of $179M vs. consensus $170M. Sees full-year EPS of $1.05-1.10, better than vs. consensus of $1.03, and revenue of $915M vs. consensus of $901M.
• Patterson Companies (PDCO): FQ4 EPS of $0.51 in-line. Revenue of $778M vs. consensus of $800M. Sees FQ1 EPS of $0.38-0.40 vs. consensus of $0.40. Sees full-year EPS of $1.94-1.98 vs. consensus of $1.94.
• Sanderson Farms (SAFM): FQ2 EPS of $0.30 beats consensus of -$0.07. Revenue of $434M in-line.
• Stage Stores (SSI): Q1 EPS of $0.06 in-line. Revenue of $353.5M in-line. Sees Q2 EPS of $0.17-0.23, better than consensus of $0.15, and revenue of $360-368M vs. consensus of $368M, and comps down 3%-5%.
• Stein Mart (SMRT): Q1 EPS of $0.17 beats consensus of -$0.04. Revenue of $352M vs. consensus of $366M.
• Suntech Power (STP): Q1 EPS of $0.35 beats consensus of $0.27. Revenue of $434.5M (+76.1%) vs. consensus of $377M. Sees Q2 revenue of $430-440M vs. consensus of $428M. Sees full-year Revenue of $1.9-2.1B vs. consensus of $1.98B. Says it's virtually sold out for the year.
• Tech Data (TECD): Q1 EPS of $0.43 beats consensus of $0.42. Revenue of $6.07B vs. consensus of $5.74B. Sees Q2 revenue of $6-$6.2B vs. consensus of $5.66B.
• Zale (ZLC): FQ3 EPS of -$0.42 in-line. Revenue of $477M vs. consensus $458M. Comps +5.8%.

Today's Markets

• Asia: Nikkei +0.37% to 13,978. Hang Seng -1.64% to 25,043. Shanghai -1.65% to 3,486. BSE Sensex -1.93% to 16,911.
• Europe: FTSE +0.25% to 6,214. CAC -0.49% to 5,004. DAX -0.45% to 7,011.
• U.S. futures are up slightly at 7:10 AM. Dow +0.15% to 12,638. S&P +0.13% to 1,394.75. Nasdaq +0.08% to 1,966.
• Gold -0.65% to $923. Crude +0.39% to $133.72. High for the July contract: $135.09.

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[nukldrager]

It's going to be a crude awakening...

[RichardSchweitzer]

And still, there are no Carter-era type lines at the gas stations.

However, there are some in Congress who are looking for ways to return to that condition.

Vote early and often (changing each time) in November.

[tomnleeryan]

I remember the Carter - era lines at gas stations, and the NO GAS signs too.... and the price controls that followed and made things worse.
Now I have experienced some long lines like that at the COSTCO discount gas pump. More people are gassing there to get a few cents off the price of gas at their neighborhood station, making for a much longer wait, much longer lines at COSTCO out in Puget Sound's Kitsap Peninsula. We've been gassing there for years, and breezed through until this month.

[Karl F.]

"IEA sees crude crunch". You should quote the source and say that it is an unconfirmed wild assumption about the results of a just started study, full of uncertainties, about the supply situation 10 years from now. Besides supply, nobody knows what oil demand will be in 10 years, with all kind of conservation measures and alternatives beeing developed.
There are already enough false statements fuelling the speculation. You should not add to that.

[aamerican]

The word is "gouging", the Bush regime drops oil in inventory to make more available in U.S. and lower cost (knowing its not going lower), big money says, "price of oil rises because inventories are down", raise inventory levels, and big money says "lack of fuel for consumers" (Chicken or the egg theory). The real terrorist act is still going on in the U.S. and Washington.

[uthr]

Eli, just want to let you know how much I like your new method of reporting the earnings results in Wall Street Breakfast. I find it the most useable earnings reporting that I've seen online. Love the red and green highlights; that you split the earnings into after close and before open; and how concisely the list presents a large amount of info.
Thank you!!
Ruth

[SA EditorEli Hoffmann]

Thanks Ruth, I'm really glad you find the earnings summaries useful.

We're going to continue doing them this way, but we've got something else in store too. Hint: Keep an eye on our home page next week.

[dreamer]

Oil price is going up that scares the consumers but not the government. In fact timely government inventory drop serves as catalyst to price increase. There is no cry from the goverment to control or to do some thing. After reading David Baldacci's and Clive Cussler's fiction stories on government, my question is "is there any connection."? Our scientist and researchers those who put man on the moon are capable producing quick results considering hydrogen and bio fuels. In fact pwerful hydrogen technology was develpoed by private investor in late seventies and is readily available. Only we need money and interest of our goverment. Is oil lobbyist over powering consumers cry?