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Investment News Briefs Wednesday, June 24, 2009

Money Morning Staff — Wed, 24 Jun 2009 15:00:17 +0000

Existing Home Sales Rise, But Miss Estimates; Boeing Shares Plummet; Automakers Get $8 Billion for Fuel Efficiency; Sprint CFO Not Concerned About Pre Shortages; Kroger Beats the Street; MySpace Lays Off 300 More; Best Buy Testing Used Game Waters; Madoff’s Lawyer Pleads for Leniency

Existing home sales rose 2.4% to a seasonally adjusted rate of 4.7 million last month, the National Association of Realtors said yesterday. That compares to April’s rate of 4.6 million, but is still down from the same period last year, when it was 4.9 million. Economists surveyed by MarketWatch.com were expecting an increase to 4.8 million.

Shares of The Boeing Company (NYSE: BA) tumbled more than 6% yesterday (Tuesday) after the aircraft maker said it will miss its June 30 first-flight target for its new 787 Dreamliner and a new delivery timetable won’t be available for weeks. Already two years behind schedule, the plane’s monitors on the body above the wing showed stresses beyond what models predicted and there was little point flying in a reduced test pattern, Chief Executive Officer Scott Carson said in a conference call. “The delay will probably lead to at least several months of push-out on first delivery,” J.B. Groh, an analyst at DA Davidson & Co. told Bloomberg News in an interview. “The best-case scenario for first delivery may be mid-2010.” He has a “neutral” rating on the stock. The aircraft is Boeing’s fastest-selling model with 865 orders.

The Obama administration has awarded three automakers $8 billion in loans to develop more fuel-efficient cars, with Ford Motor Co.(NYSE: F) getting the lion’s share of the funds: $5.9 billion.Nissan North America Inc. and Tesla Motors each got $1.6 billion and $465 million, respectively. “We have a historic opportunity to help ensure that the next generation of fuel-efficient cars and trucks are made in America,” said President Obama in a statement. “These loans – and the additional support we will provide through the Section 136 program – will create good jobs and help the auto industry to meet and even exceed the tough fuel economy standards we’ve set, while helping us to regain our competitive edge in the world market.” The Department of Energy received more than 100 applications for fuel efficiency-related loans.

Shortages of Palm Inc.’s (Nasdaq: PALM) newly launched Pre will continue, but the smartphone has not felt any impact from last week’s launch of Apple Inc.’s (Nasdaq: AAPL) iPhone 3GS, Sprint Nextel Corp. (NYSE: S) Chief Financial Officer Bob Brust told investors at Wachovia Corp.’s Annual Mid-Year Equity Conference during a webcast. “We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week,” Brust said. Analysts estimate between 50,000 and 100,000 Pres were sold in its opening weekend earlier this month, while Apple said Monday the new iPhone sold 1 million units in its opening weekend.

Kroger Co. (NYSE: KR) beat analyst estimates for its first quarter, thanks to a higher-than-expected profit. For the quarter ended May 23, the largest U.S. supermarket chain posted a net income of $435.1 million, or 66 cents per share on revenue of $22.8 billion. That compares to a net income of $386 million, or 58 cents per share on revenues of $23.1 billion in the same period last year.The average analyst estimate for Kroger was 61 cents per share, according to Reuters estimates. The company’s full-year earnings forecast was unchanged from an estimated $2.00 to $2.05 per share.

News Corp.’s (Nasdaq: NWS) social networking websiteMySpace.com will cut an additional 300 jobs outside the United States, The New York Times reported. The number represents two-thirds of its international staff of 450. The news comes less than a week after MySpace said it would cut 1,000 jobs due to sagging ad sales and lost share to rival Facebook Inc. “Facebook seems to have been better at opening up its appeal to more age groups, in more markets,” said Karin Von Abrams, an analyst at research firm eMarketer told The Times. “Once the momentum begins to build for one site, there’s a kind of self-fulfilling prophecy to it.”

Best Buy Co. (NYSE: BBY) will begin testing kiosk-based used video game sales in the Dallas and Austin, Tex. markets starting this week, The Wall Street Journal reported, citing a blog postingby Chief Marketing Officer Barry Judge. The kiosks will scan the games to ensure functionality, and then dispenses a voucher for a Best Buy gift card based on the value of games traded in. The used video game market has proven to be lucrative for the world’s largest game retailer, GameStop Corp. (NYSE: GME). GameStop generated $165.5 million in profits from the sale of used games alone in its last quarter ended May 2, compared to $156.6 in the same quarter the previous year. Taking into account all of the used products it sells including consoles and accessories, GameStop turned a profit of $542.1 million in its last quarter, versus $473.4 million in the same quarter last year. Wedbush Morgan analyst Edward Woo told The Journal that GameStop owns about 90% of the used game market.

Bernie Madoff’s lawyer has asked a federal judge for leniency in his sentencing, requesting that he serve as few as 12 and no more than 20 years in prison after he was convicted of orchestrating a massive Ponzi scheme, Bloomberg News reported. “We seek neither mercy nor sympathy. Respectfully, we seek the justice and objectivity that have been — and we hope always will be — the bedrock of our criminal justice system,” defense lawyer Ira Sorkin said in a letter filed in Manhattan federal court yesterday (Tuesday). The 71-year-old Madoff is facing a maximum 150 years in prison when he is sentenced on Monday.

Source: Investment News Briefs Wednesday, June 24, 2009

Investment Strategy: Value Brands Strike Again

Andrew Snyder — Wed, 11 Mar 2009 16:03:55 +0000

Kroger (NYSE:KR) investors are seeing strong gains today as generic brands prove their worth. The recession may be hammering most retailers, but select niches are doing very well.

It is the battle of the tightwads these days. Yesterday it was McDonald’s (NYSE:MCD) and its value-menu offerings grabbing the attention of investors. Today it is Kroger (NYSE:KR) and its private-label product lineup.

There is a saying in the grocery industry. “Shoppers need to buy groceries, but they do not need to buy groceries from you.”

In an economic downturn like this one, the line could not ring more true. With groceries stores of all sizes and styles popping up seemingly on every suburban street corner, consumers have more choices than ever.

The grocers that have managed to keep their product offerings and prices in line with consumer demands are doing well. The companies that have not been so dynamic are failing.

Fortunately for its investors, Kroger has used its private labels to offer cost-conscious shoppers some high-quality alternatives at lower prices.

During the recent boom cycle, some consumers were embarrassed to be caught in the checkout line with a cart full of generic brands. But in today’s recession, penny pinching and coupon clipping is a new fad. Fortunately for guys like me, it’s hip to be square.

Ramen Noodles: the ultimate recession-proof product

During its latest fiscal quarter, Kroger reported a net income of $349 million or $0.53 per share on revenues of $17.26 billion. Profits were up 8% over last year’s figure of $322 million. That is fantastic growth during one of the worst quarters in the nation’s recent economic history.

Read the full article here: Investment strategy: Value brands strike again

Monsanto Sells Milk-Hormone Unit to Focus on Seed Product Lines

Jennifer Yousfi — Thu, 21 Aug 2008 13:11:46 +0000

Monsanto Co. (MON), the world’s largest seed producer, is selling off its rights to a synthetic milk-producing hormone in order to focus its attention more closely on its core business of developing genetically modified seeds and pesticides. U.S. pharmaceutical company Eli Lilly & Co. (LLY) will pay Monsanto $300 million for Posilac, the brand name for recombinant bovine somatotropin or rBST. The deal includes the global sale rights and a Georgia-based manufacturing plant.

Lilly has been distributing Posilac, which has been on the market since 1994, for Monsanto under an exclusive agreement and hopes this deal will enable it to expand its veterinary health offerings.

“You’d assume the controversy is part of the price, so there must be some other reason Lilly wants this asset,” Charles Anthony Butler, an analyst for Lehman Brothers Holdings Inc. (LEH) in New York, told Bloomberg News. “Maybe it’ll help them sell other products to those farmers. Animal health as a component for all pharma companies is a business they want to grow.”

While Lilly’s motives for the purchase remain unclear, it’s a smart move for Monsanto.

Growing consumer opposition to the use of hormones in dairy products has been swelling over recent years. Sales of such products are already outlawed in Canada and parts of the European Union.

In the United States, leading grocer The Kroger Co. (KR), coffee-chain Starbucks Corp. (SBUX) and the largest domestic milk processor Dean Foods Co. (DF) all refuse to use milk that contains rBST.

This recent sale is part of Chief Executive Officer Hugh Grant’s plan to sell-off Monsanto’s smaller animal units in order to concentrate company efforts on Monsanto’s popular crop-agriculture product lines, which include Roundup-brand herbicide, as well as modified corn and soybean seeds.

Divesting this controversial asset can only help Monsanto bolster its international reputation. Shares gained $5.22, or 4.63% yesterday (Wednesday), to close at $118.08.

Meanwhile, Lilly’s stock shed $0.39, a decline of 0.82%, to close at $47.41.

Source: Monsanto Sells Off Controversial Milk-Hormone Unit to Focus on Seed Product Lines

Global Investing Roundups Wednesday, June 25th, 2008

William Patalon III — Wed, 25 Jun 2008 12:53:57 +0000

Kodak Announces $1 Billion Buyback; Kroger Lowers Prices, Posts Profit; BP Breaks Ground on Wind Farm; Reliance and Dreamworks in Talks; Lukoil Joins Up With Italy’s ERG; Wachovia Brings in Goldman Sachs; Dow Hikes Prices; Yahoo and Microsoft Back in Talks

Shares of Eastman Kodak Co. (EK) rose the most in 20 years as it boldly announced it will buyback $1 billion of its stock using a tax refund. The refund comes from an audit of the company’s taxes from 1993 to 1998, Bloomberg reported. The company posted a first-quarter loss in April.

Kroger Co. (KR), the largest chain of U.S. grocery stores, beat analysts’ first-quarter earnings by lowering prices on the shelves and offering gasoline discounts, Reuters reported. The Cincinnati-based company Kroger posted a profit of $386 million, or 58 cents per share, compared with a profit of $336.6 million, or 47 cents per share, in the year-earlier quarter.

BP PLC (BP) broke ground on a wind farm in Kansas yesterday (Tuesday), The Associated Press reported. The first phase of the project, located about 60 miles southwest of Wichita, is expected to generate up to 100 megawatts of electricity starting at the end of the year.

India’s Reliance Entertainment and is in talks with Hollywood’s DreamWorks Animation SKG (DWA) to raise up to $2 billion for a joint movie venture, according to a recent report by The Associated Press. There are four to five other parties involved in the talks, the AP said, citing sources close to the deal, including Universal Pictures. However, a deal will not be signed anytime in the near future.

Lukoil (ADR: LUKOY) plans to pay about $2.1 billion for a 49% stake in a refining joint venture with Italy’s ERG SpA, MarketWatch reported. The two companies will jointly operate the ISAB refinery complex in Priolo, Sicily.

Wachovia Corp. (WB) has hired Goldman Sachs Group Inc. (GS) to evaluate its risky portfolio of adjustable-rate mortgages that give loan holders several monthly payment options including an interest-only option that increases the balance of the mortgage. Wachovia could be in the market to sell the portfolio, DowJones reported, which could lead to heavy losses for the bank.

The Dow Chemical Co. (DOW) announced yesterday (Tuesday) that it would increase prices as much as 25% to offset soaring petroleum and raw material costs. “The staggering increase in our costs over the past few months have forced us to take these further measures in order to restore our margins,” Chief Executive Officer Andrew Liveris said in the statement, Bloomberg News reported.

Yahoo! Inc. (YHOO) shares climbed 2.75% yesterday (Tuesday) with a gain of 59 cents to close at $22.04 on speculation that the search engine firm could be back in talks with Microsoft Corp. (MSFT). Several media reports citing undisclosed sources said the two tech firms were hashing out a possible deal for Yahoo’s online search business, MarketWatch reported.

Source: Global Investing Roundups Wednesday, June 25th, 2008