Business Briefs - Wednesday
METALS
ArcelorMittal profit up, misses
The world’s biggest steel maker said its Q1 net profit rose 5.3% to $2.37 bil, missing views. Sales jumped 22% to $29.8 bil, also slightly below forecasts. Strong demand raised steel prices, but ArcelorMittal () said a significant rise in raw material prices eroded profit margins. The company said it expects record results from Asia, Africa and former Soviet states. It dipped 0.2% to 97.
ArcelorMittal () said it will raise its prices about 20% on flat carbon steel products in Europe.
BHP, Rio up on new merger talk
BHP Billiton () and Rio Tinto () rose amid heightened speculation that the 2 mining giants are takeover targets. Unconfirmed reports said an unnamed Chinese entity was attempting to build a stake in BHP, fueling speculation that BHP may raise its Rio takeover bid, currently valued at about $175 bil. But some experts said Australian regulators likely would block a Chinese firm from buying a major stake. BHP climbed 2.7% to 90.21. Rio Tinto rose 1.6% to 525.40.
Planned expansions by major iron ore producers will not be enough to offset rising demand for steel, particularly from China, analysts said at a mining conference in Monte Carlo.
SHIPPING
Improved rates, fleet lift Diana
The Greek dry-bulk shipper said Q1 EPS rose 78% to 71 cents, topping views by 4 cents. Revenue gained 105% to $78.9 mil, above forecasts. Diana Shipping () was helped by improved freight rates, increased operating days and a bigger fleet. Diana said the rest of ‘08 will be equally strong because it already has secured $241 mil-$247 mil in revenue for the 95%-97% of the operating days remaining for the year. Analysts expect ‘08 revenue of $318 mil. Shares rose 1.8% to 34.93.
Double Hull misses as costs rise
The oil tanker owner and operator said Q1 EPS rose 4% to 25 cents, missing views by 3 cents. Revenue gained 23% to $24.9 bil, also below forecasts. Double Hull Tankers () was boosted by higher vessel charter rates that were driven mostly by Chinese oil demand, but it was hurt by higher operating expenses, mostly due to higher debt costs. It also announced a quarterly dividend of 25 cents payable on June 11. Shares surged 5% to 11.26.
TECHNOLOGY
Google adds to market dominance
The Internet search and advertising king increased its share of U.S. Web searches in April, according to research firm Hitwise. Google’s () share rose to 67.9% in April, up from 67.3% in March. Meanwhile, Internet icon Yahoo’s () share of searches dipped slightly to 20.28% in April from 20.29% in March. Microsoft () fell to 6.26% from 6.65%. IAC/InterActiveCorp’s () Ask.com rose to 4.17% from 4.09%. Shares of Google fell 1.2%, Yahoo rose 2.2% and IAC/Interactive climbed 3.2%.
Linux to enter cell phone market
Verizon Wireless, () the No. 2 U.S. wireless carrier, will offer Linux-based mobile phones, posing a potential threat to Microsoft () and Google, () which is developing a Linux-tied system called Android. Verizon expects to sell Linux Mobile, or LiMo, phones next year. Analysts said phone companies may embrace Linux because it’s free, helping them boost profit margins. Microsoft could potentially suffer the biggest hit, since it draws significant revenue from mobile phone software. Microsoft edged up 0.5%.
Apple, () the maker of iPhone, said Switzerland’s telecom giant Swisscom will carry the iPhone later this year. It fell 2% to 186.26.
IBM offers BlackBerry software
The computer giant said it started selling software allowing corporate customers to make greater use of their BlackBerry mobile devices. IBM’s () Cognos program allows users to remotely access real-time data from their company’s computers on their Research In Motion () BlackBerrys. IBM also introduced additional software allowing users to access additional content from their corporate servers. IBM rose 0.7% to 127.52. RIM fell 1.6% to 138.56.
NICE meets, raises ‘08 outlook
The data recording company said its Q1 EPS rose 16% to 36 cents ex items, meeting views. Revenue rose 25% to $147 mil, above views. Higher demand boosted the result. NICE () expects Q2 EPS of 37-41 cents ex items, vs. views of 40 cents. It also sees Q2 sales of $151 mil-$155 mil vs. views of $151.1 mil. The company backed ‘08 EPS in line with views and raised sales forecasts to $619 mil-$634 mil vs. views of $624.8 mil. It surged 7.5% to 33.28.
CONSUMER
Sony earned profit, sees decline
The consumer electronics giant said it swung to Q4 profit of $277 mil, recovering from a year ago’s loss. Sales fell 6.5% to $18.6 bil. Strong sales of flat-panel TVs and digital cameras boosted the result, but sales of cell phones, tube TVs, and PlayStation 2 machines declined. For the fiscal year through March ‘09, Sony () expects profit to slide 21.5% to $2.8 bil, and sales to edge up just 1% to $86 bil due to a weaker dollar. Shares surged 8.4% to 49.93.
FINANCE
ING subprime hit relatively small
The Dutch banking and insurance giant said Q1 net profit fell 19% to $2.4 bil, below expectations. ING () blamed the bulk of the decline on weaker valuations in its real estate and private equity investments, as well as lower stock investment gains. ING also took a charge of about $85 mil on its subprime-related investments, far less than the billions in losses other big financial firms reported. Analysts said the small subprime charge reassured the market. It rose 3.4% to 39.19.
Lehman, Morgan cut by Goldman
Lehman Bros. () likely will suffer a loss in Q2, Goldman Sachs () predicted, citing slower client and investment banking activity and poor results from principal and proprietary trading. Goldman predicted Lehman will post a Q2 loss of 20 cents a share, dramatically lower than the $1.35 profit it previously had projected. Goldman Sachs also cut its Q2 earnings forecast for Morgan Stanley () to 80 cents a share, down from $1.60, saying results may suffer from hedging activity and losses related to credit losses. Lehman fell 1.7% to 42.23. Morgan Stanley edged up 0.8% to 46.96.
Merrill revamps its rating system
The brokerage announced it’s revising the methodology it uses to evaluate stocks and the changes will result in at least 20% of the companies it covers being given sell ratings, about four times higher than the Wall St. average. Merrill Lynch’s () new guidelines also will limit buy ratings to 70% of stocks. The company said about 37% of stocks fall every year, and the changes will provide more transparency into analysts’ views. It rose 1.3% to 48.87.
Charles Schwab, () a discount brokerage, said April daily average trades rose 15%, while it added $3.8 bil in new assets. Schwab fell 0.5% to 22.20.
OptionsXpress, () the online options and futures brokerage, reported average trading volume of 37,100 trades a day in April, a 16% rise from a year ago, but a 2% drop from the previous month. It ended April with a total of 282,500 customers, a net gain of 5,400. Shares climbed 2.7% to 22.09.
Royal Bank of Scotland () shareholders approved the company’s plan to issue nearly $24 bil in stock, the biggest such offering in British history, to help shore up finances rocked by mortgage-tied loses, the credit crunch and last years’ buyout of ABN Amro. It fell 5% to 6.42.
RETAIL
Macy’s tops, backs ‘08 guidance
The retailer said Q1 EPS fell 88% to 2 cents ex items, but still beat forecasts of a 2-cent loss. Revenue dropped 3% to $5.75 bil, also topping expectations. Macy’s () has struggled with disappointing sales and resistance from shoppers in some markets where its name replaced local favorite May Co., which it bought in ‘05. Macy’s has boosted localized marketing to boost its image. It backed its ‘08 EPS outlook of $1.85-$2.15, the midpoint above views of $1.88. It rose 3.6% to 24.93.
Jack in the Box expects weak Q2
The fast-food chain said its Q2 EPS rose 10% to 44 cents, beating views by a penny. Sales rose 5% to $693 mil, above views. Its same-store sales at its company-owned restaurants slipped 0.1%. Jack in the Box () said its sales decline was due to weakness in the Calif., Ariz. and Las Vegas markets, which have been hit by the housing downturn, high fuel prices and unemployment. It expects Q2 same-store sales to dip 2%. Shares fell 10.4% to 24.87.
Safeway, () a grocer, said its board increased the company’s stock buyback authorization by $1 bil to total of $5 bil.
TRANSPORTATION
Delta pilots OK contract changes
Nearly 80% of the airline’s 7,000 pilots voted for a contract that will give them pay raises, an equity stake and other benefits, but also will give management more leeway to adjust seniority as part of a proposed merger with carrier Northwest. () Delta () rose 7.6% to 7.95. Northwest rose 7.7% to 9.21.
MEDICAL
AstraZeneca drug gets FDA’s OK
The FDA has approved the drugmaker’s anti-psychotic medication Seroquel as a maintenance treatment for patients with a type of bipolar disorder. Seroquel is AstraZeneca’s () 2nd-biggest selling drug. It’s already on sale to treat schizophrenia and depressive or manic episodes, but faces strong generic competition. The new approval means that patients may take Seroquel as an adjunct to the already widely used medicines lithium and divalproex for maintenance treatment of bipolar I disorder. It rose 2.1% to 41.53.
Court overturns Vioxx verdict
A Texas appeals court overturned a $32 mil verdict against Merck () in one of the few trials it lost over its withdrawn painkiller Vioxx. The court said the family of Leonel Garza, who died of a heart attack at 71, did not prove his brief use of Vioxx caused blood clots that led to his death. Merck rose 1.7% to 39.83.
