Market Monitoring – Week Ended 14 February 2014

With the Contribution of Junior Analysts
Earnings Verified by Joma Jose
Edited by Vani Rao

US Stocks Post Best Gains Buoyed by Positive Consumer Sentiment Data

Major indexes notch second straight weekly gains; Dow up 0.79%

Investors shrugged off a surprise drop in industrial production data and focused on a mildly better-than-expected consumer sentiment gauge and earnings reports for the week ended 14 February 2014.

Source: Bloomberg
Source: Bloomberg

The S&P 500 Index rose 8.80 points, or 0.48%, closing at 1,838.63, which translates to a weekly gain of 2.3%.

The Dow Jones Industrial Average added 126.80 points, or 0.79%, at 16,154.39, posting a weekly gain of 2.3%.

The Nasdaq Composite rose for the seventh consecutive session after a volatile start, adding 3.35 points, or 0.08%, to end at 4,244.03. The tech-heavy index gained 2.9% over the week, its highest level since July 2000.

The Financials sector added just 0.15% on Friday, extending its weekly gain to 1.6%.

Similarly, other top-weighted sectors like Healthcare (+0.35%) and Technology (+0.22%) lagged, while Consumer Discretionary (+0.56%), Energy (+1.45%), Industrials (+0.73%), and Materials (+0.69%) picked up the slack.

The Energy sector drew considerable strength from its largest member, ExxonMobil (NYSE:XOM), which surged 2.9%. Telecom was the only loser in Friday’s trading (-1.08%).

Movers & Shakers

MM pic 2Cliffs Natural Resources (NYSE:CLF) shares advanced 5.75% after the firm announced that Gary Halverson will lead the firm a day after activist investor Casablanca Capital LP offered a different candidate.

Source: WSA
Source: WSA

Shares of LCA-Vision Inc. (NASDAQ:LCAV), the LasikPlus vision-correction provider, surged 28% on news that the firm is going to be acquired by PhotoMedex Inc. (NASDAQ:PHMD) for $106.4 million.

Hyatt Hotels Corp. (NYSE:H) shares rose 7.01%. The global hotel chain announced on Friday that its fourth quarter profit more than doubled to $32 million, or 20 cents a share, from $16 million, or 9 cents a share, a year ago.

Murphy Oil Corp.’s (NYSE:MUR) shares gained 4.96%. The company is considering the sale of some oil and gas assets in Asia, which could bring in about $3 billion, as per a Reuters report on Friday.

Trulia (NYSE:TRL) tumbled 17.73% after the online real estate listing site reported wider losses on Thursday.

GNC Holdings Inc. slumped 14.64% after a muted outlook for the coming year. The firm said it expected per-share earnings of $3.18 to $3.24 in 2014, but Wall Street had been expecting $3.45.

Shares of Discovery Communications Inc. (NASDAQ:DISCA) rose 1.93% after analysts at Guggenheim Partners upgraded the media company to Buy from Neutral a day after its earnings results.

Futures

Treasury yields edged higher after steep losses the previous session, but their uptrend could unravel as the recent run of weaker-than-expected economic data has raised doubts about the stability of the US economic recovery. Benchmark 10-year notes were down 2/32 to yield 2.74%. The 30-year bond fell 2-13/32 to yield 3.69%. Euro zone growth numbers topped forecasts and helped push the euro to a nearly three-week peak against the dollar, which slid for a second straight day on accumulating worries about US economic growth. The dollar index slid down 0.24% to 80.065. The pound was up 0.53% against the dollar at $1.6745. The dollar was down 0.34% against the yen at 101.80 yen. The euro rose 0.14% to $1.3715.

Oil prices dipped as disappointing US manufacturing and retail sales data suggested a sluggish economic start to 2014, outweighing supply disruptions in Libya and Angola. Crude dropped 0.06% to $100.29 a barrel.

Gold rose to a three-month high above $1,300 an ounce, gaining more than 1% and notching its biggest weekly gain in six months as weak US manufacturing output pressurized the dollar and lifted the bullion’s currency-hedge appeal. Spot gold rose 1.25% to $1,318.55 an ounce. Gold futures for February delivery gained 1.46% to $1319.40 an ounce.

There was some respite for Bitcoin, as withdrawals from Mt. Gox should restart soon, the troubled bitcoin exchange said on Monday, after the price of the virtual currency tumbled to fresh lows on the exchange.

This followed an announcement from Slovenia-based bitcoin exchange Bitstamp, which said that it had restored automatic withdrawals. The exchange had suspended moves last Tuesday due to a transaction malleability bug that allowed hackers to create false transaction data.

The same flaw led to a halt of withdrawals at Mt. Gox site a week ago, kicking off a wave of fresh jitters over the virtual currency. On Mt. Gox, a bitcoin last traded at $311.95, after hitting a low of $220.29 on February 16, 2014.

Source: markets.blockchain.info
Source: markets.blockchain.info

Economic Front

US factory output stumbles on cold weather

US manufacturing output unexpectedly fell in January, recording its biggest drop in more than 41/2 years, as cold weather disrupted production in the latest indication that the economy got off to a weak start this year. Factory production fell 0.8% last month, the Federal Reserve said. It was the first drop since July and the biggest since May 2009. The manufacturing output increased 0.3% in December 2013.

A separate report showed that the Thomson Reuters/University of Michigan index of consumer sentiment stood at 81.2 early this month, unchanged from January. With production declining, the amount of industrial capacity in use fell 0.4% to 78.5% in January. Meanwhile, the US Labor Department said that the prices for US goods and services sold abroad climbed 0.2% during the month.

Bank of Japan keeps the monetary policy unchanged

The Bank of Japan kept its broad monetary policy and assessment of the economy unchanged on Tuesday, 18 February 2014, but also extended two soon-to-expire special lending programs, doubling their size. At the end of their two-day policy meeting, the central bank said its board voted unanimously to keep the pace of its monetary easing unchanged, as widely expected. It also retained the language from the previous policy statement that the economy continued “to recover moderately.” However, it also said it would “double the scale” of its programs lending to banks in order to stimulate loans and support the economy.

Earnings Releases

Hyatt’s Q4 revenue at $1.09 billion, outperforms expectations

Hyatt Hotels Corporation’s (NYSE:H) Q4 revenue rose 9% to $1.09 billion, over the year-ago quarter, exceeding analysts’ forecast of $1.08 billion. Excluding one-time items, Hyatt earned $51 million, or 32 cents per share, easily surpassing analysts’ consensus of 20 cents per share. The company’s quarterly revenue was boosted by an increase in business travellers and an upsurge in tourism. Tourism in the US economy picked up and thereby led to higher occupancy rates. Hyatt reported an average daily room rate increase of 4.7% for the fourth quarter at company-owned and leased hotels open at least one year ago. Hyatt’s management announced that it has plans to open approximately 40 hotels in 2014. On Friday, February 14, 2014, the company’s shares recorded a new 52-week high of $53.63, before gaining 7.01% to end the day at $52.85.

DTE reports Q4 profit, meets expectations

DTE Energy Company (NYSE:DTE) reported fourth-quarter net income of $124 million, or $0.70 per share, compared to $81 million, or $0.47 per share, in the year-ago quarter. Operating EPS for the fourth-quarter stood at $1.01, bettering Thomson Reuters’ consensus estimates of $0.95 per share. DTE’s operating revenue increased to $2.53 billion, compared to $2.35 billion in the prior-year quarter. Analysts expected revenue of $2.44 billion for the quarter under review. Going forward, DTE Energy raised its earlier communicated 2014 operating EPS guidance of $4.15-4.39 to $4.20-4.40 per diluted share.

Ventas Q4 revenue up, meets earnings expectations

Ventas Inc. (NYSE:VTR) reported a 12% revenue growth in the fourth quarter FY2013 to $732.9 million from $655.7 million in the year-ago quarter. Ventas Inc.’s revenue overshadowed the consensus estimates of $712.5 million. The company’s fourth quarter 2013 normalized FFO (funds from operations) rose 7% to $313.6 million, from $293.6 million for the year-ago quarter. Ventas Inc.’s normalized FFO per share increased from 99 cents in Q4 2012 to $1.06 in Q4 2013, in line with Thomson Reuters’ estimates. The Q4 performance was driven by strategic investments over the last two years. The company reported strong same-store cash flow growth in its senior housing communities managed by Atria and Sunrise and rental hikes in its triple-net lease portfolio. The management declared a dividend of 72.5 cents per share for the first quarter of FY2014, representing an 8% hike from the dividend in the first quarter of 2013. The dividend is payable in cash on March 28, 2014 to stockholders of record on March 7, 2014. As guidance for 2014, Ventas expects its 2014 normalized FFO per share in range of $4.31-4.37, an increase of 5.5-7% from that in 2013.

TRW Automotive posts strong Q4 results, outlook optimistic

TRW Automotive Holdings Corp.’s (NYSE:TRW) fourth-quarter revenue rose 12% to $4.5 billion from the year-ago period, exceeding analysts’ estimates of $4.22 billion. Excluding one-time items, the company reported EPS of $1.84, easily surpassing Bloomberg’s average estimates of $1.64. Strong growth in North America and China has boosted the company’s forecast for FY2014. TRW is expecting sales of $17.3-17.6 billion in FY2014, including about $4.3 billion in the first quarter. The world’s biggest vehicle-safety equipment supplier forecasts its vehicle production volume to increase 4% in North America and 1% in Europe, as well as growth in China and other markets, in 2014. Following strong Q4 results, the company’s shares rose 4.55% to close at $79.81, also hitting a new-52 week high of $81.37, on Friday, 14 February 2014.

VFC reports fourth-quarter earnings growth, but misses expectations

V.F. Corporation’s (NYSE:VFC) fourth-quarter adjusted EPS increased 6% to 82 cents from the year-ago quarter, but missed the analysts’ consensus by 2 cents. VFC Corp.’s revenues improved 8% to $3.26 billion in the reported quarter from the year-ago period, mainly due to double-digit growth in its Outdoor & Action Sports, Sportswear, International and Direct-to-consumer businesses, and high single-digit percentage growth in its Imagewear coalition. The company’s revenue for its Outdoor & Action Sports segment surged 12% from the year-ago quarter to $1.92 billion. The company’s management announced a quarterly dividend of 26.25 cents, to be paid on March 20, 2014, to stockholders of record on March 10, 2014. During the quarter, VFC Corp.’s board authorized the purchase of 50 million more shares under its buyback program. The company affirmed its FY2014 outlook with a 7-8% revenue growth and adjusted EPS of $3-3.05 per share, representing a hike of 11-13%.

News to look forward to next week

Economic Releases

Housing data will underscore the impact of the harsh weather on the economy. The US Commerce Department is expected to report on Wednesday, 19 February 2014, that housing starts fell to a 950,000-unit level in January from 999,000 units in December. Also on Wednesday, the Labor Department will publish its revamped series for producer inflation. The consumer inflation report on Thursday, 20 February 2014, is expected to show very little price pressures on the economy. The Consumer Price Index is forecast to rise 0.1%, a slowdown from December’s 0.3% advance. Home resales likely fell victim to the cold weather in January. The National Association of Realtors is expected to report on Friday, 21 February 2014, that existing home sales tumbled 5% to a 4.66 million-unit rate.

Forthcoming Earnings Releases

Wal-Mart (NYSE:WMT) is expected to post fourth-quarter results on Thursday, 20 February 2014. The world’s largest retailer will give its 2014 earnings forecast, closely watched after it had to lower its profit forecast because of a bruising holiday season in which US comparable sales fell.

Hewlett-Packard (NYSE:HPQ) is expected to post first-quarter earnings on Thursday, 20 February 2014. The company can no longer count on a holiday-season bump, not with a fundamental decline in PC demand the world over. However, investors at least expect CEO Meg Whitman’s now three-year internal overhaul to have reduced costs to the point where earnings start to head north.

Wall Street will be listening for insights from Dish Networks (NASDAQ:DISH) on its wireless spectrum strategy when the company reports quarterly results on Friday. Analysts on an average expect the satellite TV provider’s earnings before taxes, interest and depreciation and amortization to rise 0.3% to $696 million as compared to the year-ago period.

Electric carmaker Tesla Motors (NASDAQ:TSLA) will report fourth-quarter results on Wednesday, 19 February 2014. The company said it delivered almost 6,900 cars in the fourth quarter, 20% above its forecast. Officials said they expect “relentless growth” in 2014, including doubling the almost 150 global sales and service locations of the company. The company may update its progress as it pushes to next introduce the Model X SUV in 2015, followed by a new family of compact cars dubbed GEN III in 2017.

Daily coupon website operator Groupon (NASDAQ:GRPN) is expected to report quarterly profit above analysts’ estimates, according to Star-Mine. Groupon said in November it expects to either break even or report a profit of 2 cents per share in the fourth quarter. The results are expected on Thursday, 20 February 2014.

Marriott International (NASDAQ:MAR) is likely to post fourth-quarter results on Wednesday, 19 February 2014. Marriott, which owns brands such as Ritz-Carlton, Residence Inn, and Courtyard by Marriott, has been able to charge more for its rooms as hotel occupancies returned to their peak levels in 2013. However, a colder-than-usual winter that delayed travel in the US, along with continued softness in Asia, could dampen the current quarter’s performance.

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