Goodyear shares soar as profit beats Street

Goodyear shares soar as profit beats Street

Stock Market Predictions

DETROIT (Global Markets) - Goodyear Tire & Rubber Co (GT.N) reported a profit more than four times as high as Wall Street had expected on strength in its home market of North America, and its shares jumped to a 19-month high.

Excluding one-time items, the Akron, Ohio-based tire maker earned 51 cents a share in the first quarter, easily topping analysts' average estimate of 12 cents, according to Thomson Global Markets I/B/E/S.

Goodyear's first-quarter sales of $5.4 billion were up 27 percent from a year earlier. Sales set quarterly records for each of the company's four global regions, including a 30-percent increase in its North American business to $2.3 billion.

Sales in its Europe region were up 28 percent to $2 billion.

Goodyear's shares rose as high as $18.68, up 15.3 percent, their highest level since September 2009. They pared gains and closed at $18.15. Goodyear's trading volume was more than triple its normal daily average on Thursday.

Earnings of two other major automotive suppliers, Lear Corp (LEA.N) and American Axle and Manufacturing Holding Inc (AXL.N), also blew past Wall Street's profit expectations on Friday, a sign that the auto industry recovery is gaining momentum globally, and particularly in North America.

"Nowhere is (Goodyear's) momentum clearer than in our North American business," said Goodyear Chief Executive Officer Richard Kramer on a conference call with analysts.

"North American profitability is essential to reaching our 2013 target" of $1.6 billion in global operating income in 2013, he said.

Operating income in 2010 was $917 million.

RAW MATERIALS COST RISING

Goodyear was able to offset higher raw materials costs, including natural rubber and carbon black, in the first quarter by selling its products for higher prices, such as a 15-percent increase in price per tire, Kramer said.

But the company will face stiffer challenges in meeting raw materials costs that will show "unprecedented" price spikes in the second half of the year, Chief Financial Officer Darren Wells said on the call.

Goodyear expects a 25- to 30-percent rise in raw material costs for the rest of 2011.

Wells said raw materials costs will produce more than $500 million in "headwinds" in the third quarter and again in the fourth quarter.

Kramer said that the company will over time make up for the lofty price spikes for natural rubber and carbon black and synthetic rubber later this year.

Goodyear said it was not greatly hurt by the earthquake in Japan. It has a plant that makes heavy machinery tires in southern Japan that was not damaged.

The main impact to Goodyear of the Japan crisis was a rise in commodity prices that hit every company with heavy reliance on those costs, Wells said.

Kramer also cautioned about pressure on company and overall auto industry financial performance later in the year.

"While we expect a strong year, we do not expect to see the same level of industry growth that we saw in the first quarter," Kramer told analysts.

Sales in the industry, including Goodyear's, were boosted in the first quarter, he said, as dealers made large purchases of tires ahead of announced price increases and as they perceived tightness of industry supply.

Wells said that Goodyear expects it can offset second-quarter raw materials price gains within that quarter.

The company's net income of $103 million, or 42 cents per share, compares with a year-earlier net loss of $47 million, or 19 cents per share.

Goodyear shares closed up 12 percent at $18.15 in trading on the New York Stock Exchange.

(Reporting by Bernie Woodall; Editing by Gerald E. McCormick, Lisa Von Ahn, Tim Dobbyn and Bernard Orr)

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Mead Johnson profit beats Street; shares rise

Mead Johnson profit beats Street; shares rise

Stock Market Predictions

(Global Markets) - Mead Johnson Nutrition Co (MJN.N), the maker of Enfamil baby formula, posted a slightly higher-than-expected quarterly profit but said a contamination scare could mean lower market share at least through the 2012 first half.

In December, Wal-Mart Stores Inc (WMT.N) and other retailers pulled certain packages of Enfamil off store shelves following the death of an infant who drank the formula.

A government investigation found no trace of contamination in sealed Enfamil packages and no reason for a recall. That took Mead Johnson out of the line of fire, but not before damaging its brand.

"While it is still early days ... that issue is going to have a meaningful downward impact on our business in the United States," Mead Johnson Chief Executive Steve Golsby said on Thursday. "While there was no noticeable impact on our fourth-quarter sales, given the late December timing, we expect to see lower market share potentially into the third quarter of this year."

The company said it was spending heavily on an advertising campaign meant to restore trust in its brand.

It forecast 2012 earnings below Wall Street estimates, but many investors were prepared for a weak outlook, said RBC Capital Markets analyst Edward Aaron.

"The range provided is consistent with our assessment of buy-side expectations heading into earnings," Aaron said in a research note.

Mead Johnson said it expects a profit of $3.00 to $3.10 per share this year. Analysts' average estimate is $3.18, according to Thomson Global Markets I/B/E/S. The forecast assumes higher commodity and packaging costs and net sales growth of 7 percent to 9 percent.

For the fourth quarter, net sales rose 13.4 percent to $911.3 million, above the $895.8 million analysts had expected. Sales in Asia and Latin America jumped 17 percent, while sales in North America and Europe rose 3 percent.

Net income for the quarter was $85.6 million, or 42 cents per share, down from $99.6 million, or 48 cents, a year earlier.

Excluding certain items, earnings came to 52 cents per share. Analysts on average were expecting 51 cents, according to Thomson Global Markets I/B/E/S.

Mead Johnson shares were up $1.19, or 1.6 percent, at $73.79 in midday trading on the New York Stock Exchange.

(Reporting By Martinne Geller and Phil Wahba; editing by Mark Porter and John Wallace)

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Michael Kors makes a glitzy market debut

Michael Kors makes a glitzy market debut

Stock Market Predictions

(Global Markets) - Michael Kors Holdings Ltd (KORS.N) stood out in its market debut, keeping pace with star technology sector IPOs and showcasing the resilience of the luxury market even in a gloomy economy.

Shares of the luxury brand touched a high of $25.23, before ending the day at $24.20 -- up 21 percent -- valuing the company at about $4.62 billion.

A day earlier, the company raised the number of shares on offer by 13 percent to 47.2 million and priced its offering above its expected range, raising $944 million.

Michael Kors' offering follows a successful $2.1 billion IPO of Italian fashion house Prada SpA (1913.HK) in Hong Kong and a $487 million IPO of Italian luxury shoemaker Salvatore Ferragamo.

Strong fundamentals, a high growth rate and good brand value make the company a good buy, according to industry analysts.

"I think the company is doing extremely well," NPD Group's chief retail industry analyst Marshal Cohen said. "One of the few brands that is going to see a surge through the holiday season."

The company, which is known for its glitzy designs, has seen its net income grow by 85 percent to $72.5 million in fiscal 2011 and boasts a gross profit margin of 55.5 percent.

The luxury goods industry has rebounded strongly after the sharp downturn of 2009, and analysts see 2011 to be another record year, particularly for watchmakers, luxury hotels, fashion and leather goods groups.

As of October 1, Michael Kors Holdings -- which sells fashion accessories, footwear and apparel -- operated 169 retail stores in North America and 34 stores in Europe and Japan.

The company said it is looking to more than double its store count in North America, and have about 100 stores each in Europe and Japan.

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Founder and Chief Creative Officer Michael Kors, who is a judge on the "Project Runway" TV show, is selling 5.8 million shares and is likely to pocket around $116 million.

The company is not selling any shares in the offering, with the entire proceeds going to the selling shareholders.

Concerns regarding the company's ability to sustain its phenomenal growth rates and insiders selling a large stake are overblown, said Josef Schuster, founder of IPOX Schuster, a fund that specializes in investing in newly public companies.

"Michael Kors still has a lot of opportunities to expand in areas like merchandizing and new-store openings, and you will see the company maintain growth rates over time even if the economy is not doing well."

The company competes with retailers such as Coach (COH.N), Burberry (BRBY.L), Ralph Lauren (RL.N) and Hermes International (HRMS.PA).

Its biggest shareholder is investment firm Sportswear Holdings Ltd, which will cut its stake to 37.7 percent from 51.9 percent after the offering.

Sportswear Holdings is led by Silas Chou and Lawrence Stroll who have previously had a hand in developing other lifestyle brands including Tommy Hilfiger and Pepe Jeans.

Morgan Stanley, J.P. Morgan and Goldman Sachs were the lead underwriters on the offering.

(Reporting by Tanya Agrawal and Brenton Cordeiro in Bangalore, additional reporting by Phil Wahba in New York; Editing by Anil D'Silva)

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Affymetrix shares fall on weak Q2 revenue view

Affymetrix shares fall on weak Q2 revenue view

Stock Market Predictions

(Global Markets) - Shares of Affymetrix Inc (AFFX.O) fell about 20 percent on Thursday, a day after the genetic analysis products maker reported preliminary second-quarter revenue below market expectations.

"Affymetrix described its academic business (nearly 70 percent of revenue) as weak across all geographies, particularly in North America. Some of this business is pushed into third-quarter, as we believe it restricted its salesforce's ability to offer end-of-quarter discounts to meet quota," Leerink Swann analysts said in a note to clients.

On Wednesday, the company said it expects revenue between $64-65 million. Analysts, on average, were expecting $74 million in revenue, according to Thomson Global Markets I/B/E/S.

"Our consumable revenue was down by about 10 percent from last year," said Chief Commercial Officer Andrew Last.

The company expects product revenue of about $58-$59 million. Consumable sales was projected at about $55 million.

Leerink Swann analysts said they were expecting consumable sales of $63 million for the second quarter.

Shares of the company were trading down 19 percent at $6.48 after hitting a low of $6.42 on Thursday on Nasdaq. (Reporting by Kavyanjali Kaushik in Bangalore; Editing by Sriraj Kalluvila)

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Ingersoll Rand cuts profit view, shares tumble

Ingersoll Rand cuts profit view, shares tumble

Stock Market Predictions

(Global Markets) - Ingersoll Rand Plc (IR.N) cut its profit forecast for the rest of the year on Friday, blaming weak demand in North America for residential heating and cooling systems and commercial security products.

The warning sent shares of the U.S. maker of air conditioners and locks down as much as 18 percent to their lowest level in more than two years, and came as Wall Street is getting nervous that corporate profit growth may be slowing.

Analysts, on average, look for the companies that make up the widely watched Standard & Poor's 500 index .SPX to report 13.5 percent earnings growth in the third quarter, down from an average forecast of 17 percent as of July 1.

"You don't have to be a rocket scientist to know that residential markets were not going to be doing anything substantial for a company's results," said Eli Lustgarten, an analyst at Longbow Research. "This (Ingersoll forecast) is a warning sign, to show you that improving profits and beating guidance is not going to be easy for a while."

Electric products maker Cooper Industries Plc (CBE.N) also cited weak demand for products used in residential and commercial buildings when it cut its third-quarter forecast earlier this month.

Ingersoll's troubles are twofold: The second-half recovery in consumer demand for air conditioning and security systems that it expected has not materialized, and consumers who have replaced air conditioners or heaters have opted for lower-priced units, rather than the more profitable, and more expensive, high-efficiency systems, analysts said.

The Ingersoll cut could be the start of a wave of earnings warnings in the industrial sector, which is grappling with weak demand in the United States and Europe, one analyst said.

"My feeling is this is the first of many in the industrial space in the next couple of weeks," said Eric Landry, an analyst at Morningstar in Chicago.

Ingersoll, which is headquartered in Davidson, North Carolina, but incorporated in Dublin, generates 67 percent of its revenue in North America. That makes it more reliant on its home market than bigger U.S. industrials, including General Electric Co (GE.N), United Technologies Corp (UTX.N) and Honeywell International Inc (HON.N), which have used growth in Asia and the Middle East to offset sluggish U.S. spending.

Ingersoll shares were down $4.21, or 13 percent, at $27.75 in early-afternoon trading, the sharpest decline on the New York Stock Exchange. They touched a low of $26.13 earlier in the session. The earlier low marked Ingersoll's biggest one-day drop since the 1987 "Black Monday" stock market crash.

The Standard & Poor's capital-goods industry index .GSPIC was down 1.9 percent, and U.S. stocks were broadly lower as investors worried the global economy is slowing.

Q3 PROFIT COULD DROP

Ingersoll, which makes Schlage locks and Trane air conditioners, cut its third-quarter profit forecast to a range of 77 cents to 80 cents per share. At its midpoint, that is down 12.8 percent from the company's prior forecast and would represent a decline from 80 cents per share in the year-earlier third quarter.

Analysts were expecting the company to post a profit of 91 cents a share for the quarter before special items, according to Thomson Global Markets I/B/E/S.

For the year, Ingersoll now expects earnings of $2.70 to $2.80 per share. At its midpoint, that is down 8 percent from prior guidance and below the $2.96 per share Wall Street had looked for.

The Ingersoll warning did not catch investors entirely unawares. Nomura analyst Shannon O'Callaghan earlier this month cut his third-quarter forecasts on a range of big industrials, including Ingersoll, GE, SPX Corp (SPW.N) and 3M Co (MMM.N), warning that he expected forecast cuts.

Not all the recent news from the sector has been as bleak. Last week Honeywell said its third-quarter earnings would likely come in at the high end of its forecast range of 96 cents to $1.01 per share.

(Reporting by Scott Malone in Boston, additional reporting by Mike Tarsala in New York and Fareha Khan in Bangalore; Editing by Derek Caney and John Wallace)

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Caterpillar sees slowdown in dealer sales growth

Caterpillar sees slowdown in dealer sales growth

Stock Market Predictions

BOSTON (Global Markets) - Caterpillar Inc (CAT.N) said growth in dealer sales of its heavy equipment slowed in the three months ended July, particularly in North America, reinforcing concerns about the struggling U.S. economy.

The world's largest maker of construction equipment said on Thursday that dealer sales -- an indicator of future revenue -- rose 35 percent worldwide over the past three months, a slower rate than the 45 percent growth reported in July.

Caterpillar shares were down 4.7 percent at $83.56 on Thursday morning, exceeding the 4.1 percent drop in the S&P 500 Index. .SPX Over the past year, Caterpillar shares have risen about 26 percent, outpacing the 10 percent climb of the Dow Jones industrial average .DJI.

Growth in North America slowed most dramatically -- to 27 percent from 50 percent -- and growth in the Asia-Pacific region dipped to 20 percent from 28 percent. Latin America was the one area to report an acceleration, with sales growth rising 1 point to 52 percent.

The report, which came in a filing with the U.S. Securities and Exchange Commission, marked the third straight decline in the growth rate from the most recent peak of a 66 percent rise in dealer sales for the three months ended in April.

Caterpillar, whose competitors include Japan's Komatsu Ltd (6301.T) and South Korea's Doosan Infracore Co Ltd (042670.KS), warned investors last month that economic growth in the United States and other developed economies had been slower than expected this year, and also warned of signs of sagging demand in China, the world's fastest-growing major economy.

A report by the American Institute of Architects released on Wednesday also suggested nonresidential construction activity was slowing down in the United States. The slump in building homes and other buildings has contributed to the nation's persistent high unemployment rate by reducing demand for blue-collar workers in the construction trade.

(Reporting by Scott Malone, editing by Matthew Lewis)

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S&P boosts Ford closer to investment grade

S&P boosts Ford closer to investment grade

Stock Market Predictions

(Global Markets) - Ford Motor Co (F.N) is within one notch of investment grade credit rating at two of the three major ratings agencies after Standard and Poor's Ratings Service on Friday boosted the automaker two notches up its ratings ladder.

S&P said the outlook for Ford is "stable."

This follows an upgrade of one notch by Fitch Ratings on Thursday. Fitch also rates Ford at BB+, the highest level of "speculative" or "junk" status, one notch below the lowest "investment grade" rating.

Moody's Investors Service has Ford rated two notches below its lowest level of investment grade. Moody's rates Ford at Ba2 on its credit risk ladder.

Ford was last at investment grade in 2005, the year before it borrowed heavily to finance its restructuring.

On Wednesday, Ford unionized workers voted nearly 2-to-1 to ratify a new four-year labor deal between the automaker and the Untied Auto Workers.

Ford said on Thursday the new labor deal would increase costs less than 1 percent annually, and higher bonuses would be offset by savings in more flexible manufacturing processes and work schedules.

S&P said of the new four-year labor contract, "We believe the contract will allow for continued profitability and cash generation in North America. Ford has a two-year track record of profits and cash flow generation in its global automotive operations, supported by strong performance in North America."

S&P analyst Robert Schulz said Ford's automotive operating cash flow in 2011 will be "at least" $5 billion.

S&P also said the company has "good prospects for generating at least $2 billion in automotive cash flow in 2012."

Fitch said a further upgrade to BBB-, investment grade, or higher is likely if Ford stays on a course for lowering its debt to $10 billion by 2015 as the automaker plans. Ford's debt at the end of the second quarter was $14 billion.

S&P on Friday also raised the rating for Ford unit Ford Motor Credit Co LLC to BB+ from BB-.

Ford Chief Financial Officer Lewis Booth said on Thursday that the company may reinstate a dividend before the ratings agencies certify it as investment grade, but did not offer an estimate on the timing of the dividend.

J.P. Morgan in a research note said on Friday, "We think a dividend is likely in the next six months, but we expect Ford to start at a fairly small or modest yield initially with the aim of announcing progressive dividend increases in the future."

Ford shares were up 3.2 percent at $12.07 on Friday afternoon on the New York Stock Exchange.

Ford shares are up 29 percent since the automaker's negotiators reached a tentative labor contract with the UAW on October 4. In that same stretch of time, the S&P 500 is up 12 percent.

(Reporting by Bernie Woodall in Detroit, editing by Matthew Lewis)

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Sony shares up after it says PlayStation network to restart

Sony shares up after it says PlayStation network to restart

Stock Market Predictions

TOKYO (Global Markets) - Shares of Sony rose on Monday, a day after the firm said it would resume some services on its PlayStation Network this week and offer customer incentives following the theft of personal information from 78 million user accounts.

Many PlayStation users around the world were frustrated that the first warning of one of the largest Internet security break-ins ever came a week after Sony detected a problem with the network on April 19.

Analysts said it was too early to say whether the measures the consumer electronics giant unveiled on Sunday would be enough to stop disgruntled gamers leaving the network and warned restoring faith in its security system would take time.

Sony has touted online services as a way of leveraging the synergies between its unique combination of hardware and content, including films and music as well as games.

"Damage has been done to Sony whatever the scale of the content giveaway at this point, and Sony is facing a prolonged effort to regain customer trust," said Jay Defibaugh, director of equities research at MF Global in Tokyo.

"Anything that undermines consumer willingness to divulge credit card details to Sony is a problem for the network strategy," he added.

Sony said on Sunday it would offer some free content, including 30 days of free membership to a premium service to existing users and in some regions pay credit card-renewal fees, but added compensation would only be paid if users suffered damage.

The news sparked thousands of comments on the official PlayStation fan page on Facebook, some of them from users who said they would switch to Microsoft's Xbox Live games network.

Shares in Sony were up 2 percent to 2,305 yen, after falling 4.5 percent on Thursday, ahead of a holiday on Friday. But analysts said concerns about the leak would weigh on investor sentiment.

"At minimum, having to suspend the service, fix its problems and deal with the aftermath, looks set to cost (Sony) tens of billions of yen," said analyst Nobuo Kurahashi of Mizuho Investors Securities.

"I don't think anyone knows where they will be able to absorb this loss, nor how much it will be, and that'll weigh on share prices going ahead," he added.

The incident has sparked legal action and investigations by authorities in North America and Europe, home to almost 90 percent of the users of the network, which enables gamers to download software and compete with other members.

Sony is the latest Japanese company to come under fire for how it has disclosed bad news.

Tokyo Electric Power Co was criticized for how it handled the nuclear crisis after the March 11 earthquake. Last year, Toyota Motor Corp was slammed for being less than forthright about problems over a massive vehicle recall.

(Reporting by James Topham and Isabel Reynolds; Editing by Edwina Gibbs and Joseph Radford)

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